Goldman Sachs Group Inc. It’s entering one of its biggest rounds of layoffs ever while locking in its plan to liquidate nearly 3,200 positions this week, and the bank’s leadership is cutting deeper than its rivals into layoffs.
The firm is expected to start the process by mid-week and according to a person with knowledge of the matter, the total number of people affected will not exceed 3,200. More than a third of these will likely be from the main business and banking units, showing the broad nature of the cuts. The firm is also preparing to disclose financial statements tied to a new unit that houses its credit card and installment lending business and will record more than $2 billion in pre-tax losses.
A spokesperson for the New York-based company declined to comment. Cuts at the investment bank have been stepped up in recent years with the inclusion of non-front office roles added to the staffing of the division. The bank has plans to continue hiring, including launching its regular analyst class later this year.
The headcount under Chief Executive Officer David Solomon has increased by 34% since the end of 2018 to over 49,000. 30, data show. The scale of the layoffs this year is also driven by the firm’s decision to largely set aside its annual cut for underperformers during the pandemic.
Slowdowns in various businesses, an influx of expensive consumer banking, and an uncertain outlook for markets and the economy are prompting the bank to cut costs. Fees from merger activity and raising money for companies took a big hit on Wall Street, and the fall in asset prices eliminated another source of Goldman’s big gains a year ago. These broader industry trends were compounded by the bank’s failures in the retail banking offensive, which accumulated over the year at a much faster rate than anticipated.
According to analyst estimates, this left the bank with a 46% drop in profits on revenue of approximately $48 billion. Still, that revenue mark was bolstered by the commerce division, which will take another leap this year, helping the company-wide figure record its second-best performance on record.
The final job cut figure is significantly lower than previous proposals in management, which could eliminate around 4,000 jobs.
The last major application of this scale came after Lehman Brothers went bankrupt in 2008. Goldman embarked on a plan to lay off more than 3,000 people, or about 10% of its workforce at the time, and senior executives chose to forego bonuses.
Sharing the Pain
The latest cuts show the recognition that even better-performing businesses this year will have to endure pain for firm-wide performance that will miss the targets set for shareholders in a year’s expense bleed.
This lack of performance was particularly evident in the new unit, Platform Solutions, which was prominent in the division’s distribution. The over $2 billion in losses there are magnified by lending-loss provisions, exacerbated by new accounting rules that force the firm to allocate more money as loan volumes and ballooning expenses grow.
“There are several factors affecting the business environment, including tightening monetary conditions that have slowed economic activity,” Solomon told staff at year’s end. “The focus for our leadership team is to prepare the firm to weather these headwinds.”
The cuts also came a week before the bank’s traditional year-end compensation talks. Even for those who remain with the firm, compensation figures are expected to decline, particularly in investment banking.
It stands in stark contrast to last year, when staff were showered with huge bonuses and even a select few were given special payouts. At the time, Solomon’s $35 million compensation for 2021 put him next to James Gorman of Morgan Stanley as the highest-paid CEO of a major US bank.
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