Goldman Sachs Group Inc (GS.N) is preparing to lay off thousands of employees to navigate a difficult economic environment, a source with knowledge of the matter said.
The firings are the latest sign that cuts are escalating across Wall Street as dealmaking wanes. Investment banking revenues have slumped this year amid a slowdown in mergers and share offerings, marking a sharp reversal from a blockbuster 2021 when bankers got huge pay bumps.
Goldman Sachs had 49,100 employees at the end of the previous quarter after hiring large numbers of staff during the pandemic. Its headcount will remain above pre-pandemic levels, the source said. The employees stood at 38,300 at the end of 2019, according to a filing.
The bank is considering a steep cut to the annual bonus pool this year, a different source with knowledge of the matter said. That contrasts with hikes of 40% to 50% for top-performing investment bankers last year, Reuters reported in January, citing people with first-hand knowledge of the matter. Mike Mayo, a banking analyst at Wells Fargo, wrote:
“GS needs to show that its costs are as variable as its revenues, especially after a year when it provided special rewards to top managers during the boom times.”
“Goldman Sachs now needs to show that it can do the same when business is not as good and that they live up to the old Wall St. adage that they ‘eat what they kill,'” he said in a note.
Consumer Bank Struggles
The newest plan would include hundreds of employees being axed from Goldman’s consumer business, a source said.
The bank indicated it was scaling back its ambitions for Marcus, the loss-making consumer unit, in October. Goldman also intends to stop originating unsecured consumer loans, a source conversant with the move told Reuters earlier this week, another sign it is pulling back from the business.
Chief Executive Officer David Solomon, who took the wheel in 2018, has tried to branch out the company’s operations with Marcus. It was placed under the wealth business in October as part of a management restructuring that also combined the trading and investment banking units.
Trading and investment banking — the traditional drivers of Goldman’s profit – composed almost 65% of its revenue at the end of the third quarter, in comparison to 59% in the third quarter of 2018, when Solomon assumed the top position.
Semafor earlier on Friday reported that Goldman will cut up to 4,000 employees as the Wall Street bank struggles to reach profit targets, citing people with knowledge of the matter.
Goldman Sachs would not comment.
Buy Crypto NowThe latest layoff plans come after Goldman fired about 500 employees in September, after pausing the annual practice for two years during the pandemic, a source with knowledge of the matter told Reuters at the time.
The investment bank had first sent out a warning in July that it might slow hiring and reduce expenses.
Global banks, including Citigroup Inc (C.N) and Morgan Stanley (MS.N), have cut their workforces in recent months as a dealmaking boom on Wall Street flamed out because of high interest rates, soaring inflation, the war between Russia and Ukraine, and tensions between the United States and China.
