The company is expected to begin the process mid-week.
Goldman Sachs Group Inc. begins one of the biggest rounds of job cuts ever as it sets a plan to cut about 3,200 jobs this week, with the bank’s leadership going deeper than its peers to cut jobs.
The company is expected to begin the process mid-week and the total number of people affected will not exceed 3,200, according to a person familiar with the matter. More than a third of that will likely come from the core retail and banking sectors, indicating the broad nature of the cuts. The company is also poised to reveal financial data linked to a new entity housing its credit card and personal loan businesses, which will post more than $2 billion in pre-tax losses, the people said, asking for the unidentified to discuss private information.
A spokesman for the New York-based company declined to comment. The cuts in the investment bank are compounded by the inclusion of the non-front office functions that have been added to the divisions’ headcount in recent years. The bank plans to continue hiring, including launching the regular analyst class later this year.
Under Chief Executive Officer David Solomon, headcount has grown 34% since the end of 2018 to more than 49,000 as of Sept. 30, data shows. The scale of layoffs this year is also influenced by the company’s decision to mostly set aside its annual cut from underperformers during the pandemic.
Slowdowns in various business areas, an expensive push into retail banking and an uncertain outlook for markets and the economy are prompting the bank to cut costs. Merger activity and corporate fund-raising fees have taken a hit on Wall Street, and a collapse in asset prices has erased another source of big gains for Goldman from just a year ago. These broader industry trends were compounded by the bank’s failures in its foray into retail banking, which has accumulated losses over the year much faster than forecast.
That has left the bank facing a 46% drop in profits, according to analyst estimates, on sales of about $48 billion. Still, that revenue mark was buoyed by the trading division, which is set to post another jump this year, helping the company-wide number post its second-best performance on record.
The number of final job cuts is significantly lower than previous senior management proposals, which could have eliminated nearly 4,000 jobs.
The last major exercise of this magnitude took place after the collapse of Lehman Brothers in 2008. Goldman had embarked on a plan to cut more than 3,000 jobs, or nearly 10% of its workforce at the time, and top executives chose to forego their bonuses.
share the pain
The recent cuts are a recognition that even companies that have outperformed this year must also endure the pain of a company-wide performance that will miss targets set for shareholders in a year of cost cutting.
This drop in performance was particularly evident in the new unit called Platform Solutions, whose numbers stand out in the breakdown of the divisions. The more than $2 billion hit there is compounded by provisions for loan losses, which are tightened by new accounting rules that force the company to set aside more money as loan volumes grow, as well as rising spending.
“There are a variety of factors affecting the business landscape, including tightening monetary conditions, which are slowing economic activity,” Solomon told employees at the end of the year. “For our leadership team, the focus is on preparing the company to weather these headwinds.”
The cuts also come a week ahead of the bank’s traditional year-end compensation talks. Compensation numbers are also expected to fall for those who stay with the company, particularly in investment banking.
It’s a stark contrast to last year, when employees were showered with large bonus increases and a few were even given special payouts. At the time, Solomon was the highest-paid CEO of a major US bank, alongside Morgan Stanley’s James Gorman, with his $35 million compensation for 2021.
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