Goldman Sachs Begins Large Round of Layoffs
Goldman Sachs is embarking this week on one of its largest rounds of layoffs since the financial crisis.
The bank began to lay off employees on Tuesday as part of a plan that will see the firm shed up to 3,200 jobs, or roughly 6 percent of its work force, said two people familiar with the changes who were not authorized to discuss them publicly. It plans to notify the bulk of the affected employees on Wednesday, the people 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, like other major investment banks, had seen its fees soar during the 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 percent over the past year, giving it a market value of $120 billion. It employed 49,100 people at the end of September.
Although most major investment banks have been forced to scale back after a rush to staff up 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 percent of its work force.
In October, Goldman Sachs 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.
Last month, Mr. Solomon warned investors of “headwinds” on costs, particularly because of inflation and spending on business operations. Mr. Solomon said the bank would “continue to seek balance” between retaining people, the bank’s largest expense, and “an appropriate pay-for-performance mind-set.”
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 percent to 50 percent from last year.
Investment banking revenue in the United States is estimated to have plunged more than 50 percent last year, to nearly $35 billion through mid-December, according to the 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 $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 their 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 last month.
“Even in the midst of a difficult operating environment, we continue to work hard to strengthen the firm,” Mr. Solomon said. “We know progress is never a straight line, but we’re excited about the opportunities ahead.”