Goldman Sachs plans to lay off nearly 4,000 employees to cut costs

Goldman Sachs is preparing to lay off as many as 3,900 employees starting in January as its chief executive, David Solomon, tries to boost the bank’s profitability amid adverse economic headwinds.

Plans are still being worked out, and the current target of culling “up to 8%” of its 49,000 global workforce could be reduced if business prospects improve, according to three people briefed on the discussions.

Wall Street is facing a sharp reduction in trading and capital markets activity after a rousing 2021 that resulted in a large increase in hiring and large bonuses. Investment bank fees are down 35% year-to-date, according to Refinitiv data.

Goldman is under particular pressure to improve margins as Solomon is trying to improve the bank’s stock market valuation, which has lagged peers like Morgan Stanley for years.

The bank announced a major overhaul in October, which included the merger of the investment bank and commercial division, as well as a pullback of retail banking following investor criticism over its losses and rising costs.

Reducing expenses is essential for the bank after net income fell 44% in the first nine months of the year, leaving it short of its crucial target of a 14% return on tangible equity, a measure of profitability.

The stock is down nearly 10% this year.

Discussions about job cuts go far beyond the bank’s newly established annual layoff of the worst performers, which was halted for two years during the pandemic. They were first reported by Semafor.

Goldman declined to comment, but Solomon hinted at upcoming cuts at the bank’s financial services conference last week.

“We continue to see headwinds in our expense lines, particularly in the near term,” he said. “We’ve put certain expense mitigation plans in place, but it will take some time to realize the benefits. Ultimately, we will remain agile and scale the business to reflect the opportunity set.”

A person familiar with the plans said the cuts would be spread across divisions rather than concentrated in one unit or country. Managers are being asked to identify personnel to be laid off before the end of the year.

The bank has been on a hiring spree, with staff numbers jumping from 38,300 at the end of 2019 to 49,100 this year.

The ax could fall hardest in the retail business, where at least 400 jobs could be eliminated.

A move into mass-market retail banking, a major shift in Wall Street’s best-known trading and consulting firm, was a central pillar of Solomon’s strategy to diversify earnings and make Goldman less dependent on its volatile earnings. investment bank.

However, investor opposition to the costly retail initiative forced Solomon to apologize and reverse course two months ago, leaving the long-term future of the division in question.

Solomon’s diversification effort will now focus on asset and wealth management and banking.

Goldman also plans to cut costs by cutting wages. Earlier this week, the Financial Times reported that the bank was preparing to cut the bonus pool for its 3,000 investment bankers by 40% or more, the biggest drop since the 2008 financial crisis.

Annual pay for Goldman’s roughly 400 partners could drop further, with some facing 50% dips as the bank prioritizes raises for junior staff who are promoted.

Translated by Luiz Roberto M. Gonçalves.