Goldman Sachs to cut 3,200 jobs this week in its biggest round of layoffs

Goldman Sachs Group Inc is embarking on one of the biggest rounds of job cuts in its history as it sets out a plan to cut some 3,200 jobs this week, with the bank’s leadership going deeper than rivals to cut jobs.

The firm is expected to start the process in the middle of the week and the total number of those affected will not exceed 3,200, according to a person with knowledge of the matter. More than a third of them are likely to come from its core business and banking units, indicating the broad nature of the cuts. The firm is also set to disclose financials tied to a new unit that houses its credit card and installment loan business, which will post more than $2 billion in pre-tax losses, said the people, who asked not to be named. like discussing private information.

A spokesman for the New York-based company declined to comment. The cuts to its investment banking are heightened by the inclusion of non-front-end roles that have been added to the divisional workforce in recent years. The bank still has plans to continue hiring, including induction into the regular analyst class later this year.

Under the leadership of CEO David Solomon, headcount has increased 34% since the end of 2018, reaching more than 49,000 as of September 30, data shows. The scale of layoffs this year is also affected by the company’s decision to mostly shelve its annual cut of underperforming workers during the pandemic.

A slowdown in several business lines, a costly foray into consumer banking and an uncertain outlook for markets and the economy are prompting the bank to cut costs. Merger activity and fees to raise money for companies have taken a hit on Wall Street, and a plunge in asset prices has wiped out another source of big profit for Goldman in just a year. Those broader industry trends have been compounded by the bank’s missteps in its foray into retail banking, where losses built up at a much faster rate than anticipated throughout the year.

That left the bank facing a 46 percent drop in profit, on about $48 billion of revenue, according to analyst estimates. Still, that revenue mark has been boosted by its trading division posting another jump this year, helping the company-wide figure reach its second-best performance on record.

The final job cut figure is significantly lower than previous proposals in the 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 embarked on a plan to cut more than 3,000 jobs, or nearly 10 percent of its workforce at the time, and the top executives chose to forego their bonuses. .

sharing the pain

The latest cuts represent a recognition that even the best-performing companies this year will also have to bear the pain of company-wide performance that will miss targets set for shareholders in a year of lost spending.

That lack of performance was particularly evident in the new unit called Platform Solutions, whose numbers stand out in the divisional breakdown. The more than $2 billion impact there is magnified by loan loss provisions, exacerbated by new accounting rules that force the company to set aside more money as loan volumes grow and expenses soar.

“There are a variety of factors affecting the business outlook, including tightening monetary conditions that are slowing economic activity,” Solomon told staff at the end of the year. “For our leadership team, the focus is preparing the company to weather these headwinds.”

The cuts also come a week before the bank’s traditional year-end compensation discussions. Even for those who remain with the firm, compensation numbers are expected to fall, especially within investment banking.

It’s a stark contrast to last year, when employees received huge bonus increases and a select few even received special pay. At the time, Solomon’s $35 million compensation for 2021 put him alongside Morgan Stanley’s James Gorman as the highest-paid CEO of a major US bank.

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