Goldman Sachs Group Inc. is embarking on one of its biggest-ever rounds of job cuts as it maintains a plan to eliminate about 3,200 jobs this week, with the bank̵[ads1]7;s leadership going deeper than rivals to shed jobs.
The firm is expected to start the process by midweek, and the total number of people affected will not exceed 3,200, according to a person with knowledge of the matter. More than a third of these are likely to be from the core retail and banking units, indicating the broad nature of the cuts. The firm is also poised to disclose financials related to a new unit housing its credit card and installment lending business, which will record more than $2 billion in pretax losses, the people said, asking not to be identified to discuss private information.
A spokesperson for the New York-based company declined to comment. The cuts in the investment bank are heightened by the inclusion of the non-front office roles that were added to divisional staffing in recent years. The bank still has plans to continue hiring, including introducing the regular analyst class later this year.
Under CEO David Solomon, headcount has increased by 34% since the end of 2018, climbing to more than 49,000 as of Sept. 30, data show. The scale of layoffs this year is also influenced by the firm’s decision to largely shelve its annual cut of underperformers during the pandemic.
Declines in various business areas, expensive consumer banking and uncertain prospects for markets and the economy are causing the bank to reduce costs. Merger activity and fees from raising money for companies have taken a toll on Wall Street, and a decline in asset prices has eliminated another source of big gains for Goldman from just a year ago. These broader industry trends have been reinforced by the bank’s failure in the banking experiment, where losses piled up at a much faster rate than forecast throughout the year.
That has left the bank facing a 46% drop in profits, on about $48 billion in revenue, according to analyst estimates. Still, this revenue mark has been boosted by the trading division which will add another jump this year, helping the company achieve its second best ever performance.
The final reduction figure is significantly lower than previous proposals in management ranks that could have eliminated nearly 4,000 jobs.
The last major exercise of this scale came after the collapse of Lehman Brothers in 2008. Goldman had launched a plan to cut more than 3,000 jobs, or nearly 10% of its workforce at the time, and top executives chose to forgo their bonuses .
Sharing the pain
The latest cuts represent a recognition that even businesses that have outperformed this year will have to take the pain, too, of a company-wide performance that will miss targets set for shareholders in a year of spending hemorrhaging.
This performance slippage was particularly evident in the new unit called Platform Solutions, whose numbers stand out in the divisional breakdown. The more than $2 billion hit there is magnified by provisions for loan losses, bolstered by new accounting rules that force the firm to set aside more money as loan volume grows, in addition to rising expenses.
“There are a number of factors affecting the business landscape, including tighter monetary conditions slowing economic activity,” Solomon told staff at the turn of the year. “For our management team, the focus is on preparing the firm to weather these headwinds.”
The cuts also come a week before the bank’s traditional year-end compensation discussions. Even for those who remain at the firm, compensation numbers are expected to fall, particularly in investment banking.
It’s a stark contrast from last year, when employees were showered with big bonus increases and a select few even received special payouts. At the time, Solomon’s $35 million compensation for 2021 tied him with Morgan Stanley’s James Gorman as the highest-paid CEO of a major U.S. bank.
Today’s featured video
Withholding tax on domestic crude oil reduced by 65%