NEW YORK – Goldman Sachs is embarking this week on one of its largest rounds of layoffs since the financial crisis.
The bank started laying off employees on Tuesday as part of a plan that will see it shed up to 3,200 jobs, or roughly 6 per cent of its workforce, said two people familiar with the changes but who were not authorised to discuss them publicly. It plans to notify the bulk of the affected employees on Wednesday, they said.
The layoffs across the bank underscore the economic challenges facing the Wall Street giant, which is also trying to regain its footing after a costly push into consumer banking.
Goldman Sachs, like other major investment banks, had seen its fees soar during the Covid-19 pandemic, bolstered by a huge upswing in deal-making, trading and related activities. But it has struggled to keep up the momentum as deals have slowed and markets have fallen. Investors have also sharply questioned the growth prospects of the consumer-lending business that the bank rolled out in 2016.
The slowdown also poses a test for the bank’s chief executive David Solomon, who was appointed to the role in 2018. Mr Solomon had been a champion of the bank’s consumer lending strategy.
Shares of Goldman Sachs have fallen about 10 per cent over the past year, giving it a market value of US$120 billion (S$159.8 billion). It employed 49,100 people as at the end of September.
Although most major investment banks have been forced to scale back after a rush to boost staff strength during the deal-making frenzy of 2020 and 2021, Goldman’s closest competitors have not yet announced a move at a similar scale. In December, Morgan Stanley cut about 1,600 employees, or 2 per cent of its workforce.
In October, Goldman announced a major restructuring that folded Marcus, its consumer banking business, into a new division combined with its asset and wealth management businesses. That move was an effective retreat from the bet on consumer lending.
Shortly before that announcement, Goldman restarted the practice of laying off underperforming employees, which it had paused during the early stages of the pandemic. It is unclear how many people lost their jobs in that round; this week’s layoffs add to those cuts.
This round of cuts comes before the bank doles out its annual bonuses for 2022, which make up a major portion of investment bankers’ salaries. Base salaries for senior bankers can range from hundreds of thousands to millions of dollars, while their bonuses can be double or triple their base.
In December, Mr Solomon warned investors of “headwinds” on costs, particularly because of inflation and spending on business operations. He said the bank would “continue to seek balance” between retaining people, the bank’s largest expense, and “an appropriate pay-for-performance mindset”.
Even for those who keep their jobs, this year’s bonus season is expected to be grim. Across Wall Street’s largest banks – Goldman, JPMorgan Chase, Citigroup, Bank of America, Morgan Stanley and Barclays – bonuses are expected to drop by as much as 30 per cent to 50 per cent from last year.
Investment banking revenue in the United States is estimated to have plunged more than 50 per cent in 2022, to nearly US$35 billion through mid-December, according to data provider Dealogic. That was a sharp contrast to 2021, one of the busiest and most lucrative for investment banks in more than a decade, with revenue of nearly US$71 billion.
The banks are set to offer more insight into their numbers for the year starting on Friday, when JPMorgan Chase, Wells Fargo and Bank of America report fourth-quarter results. Analysts expect the numbers to be disappointing.
Goldman is set to report its earnings next Tuesday.
In February, it will hold its annual investor day, during which the bank plans to lay out “specific metrics so everyone can clearly track our progress as we go forward”, Mr Solomon said in December.
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