Goldman Sachs Group Inc., is contemplating laying off thousands of workers to help navigate a challenging economic climate, according to a source.
As dealmaking slows down, Wall Street is seeing more layoffs. This year, investment banking revenue has fallen amid slowdowns in mergers. It is a sharp reversal of 2021’s blockbuster financial crisis that saw bankers receive big raises.
After adding substantial numbers during the pandemic, Goldman Sachs now has 49,100 employees as of the end to the third quarter. According to a source, its headcount will not fall below pre-pandemic levels. According to an official filing, the workforce was 38,300 as of March 2019.
According to a source, details about the number of layoffs will still be discussed.
According to a different source, the bank may reduce the annual bonus pool by a significant amount this year. This contrasts with the increase of 40 to 50% for top performing investment bankers in 2021 according to Reuters, citing sources with direct knowledge.
Mike Mayo of Wells Fargo, a bank analyst, wrote that GS must show its expenses are just as variable as their revenues. This is especially true after a period when the company offered special rewards for top managers in boom times.
He wrote in a note that Goldman Sachs must now demonstrate that it can perform the same even when the business isn’t as profitable and that they are living up to Wall St.’s old adage of ‘eat what you kill’.
In afternoon trading, the stock of the company fell 1.3% along with shares JPMorgan & Chase Co., and Morgan Stanley., which both fell 0.6% and 1.3% respectively.
This year, Goldman shares fell almost 10%. They have performed better than the S&P 500 Bank Index, down 24% over the same period.
According to a source, the latest plan will see hundreds of people being laid off from Goldman Sachs’ consumer business.
In October, Goldman announced that it would reduce its ambitions to acquire Marcus, the bank’s loss-making consumer division. A source close to the matter told Reuters that Goldman plans to cease issuing unsecured consumer loans. This was another indication it’s pulling out of the business.
David Solomon, the chief executive officer of the company, took over in 2018 and has worked with Marcus to diversify its operations. In October, it was moved to the wealth division as part of an organizational reshuffle. This also included the merger of the investment and trading banking units.
Nearly 65% of Goldman’s revenue came from trading and investment banking at the close of the third quarter. This was 59% less than the 3Q 2018 quarter when Solomon assumed the highest job.
According to sources familiar with the matter, Semafor reported earlier Friday that Goldman could layoff as many as 4,000 employees as it struggles to reach profit targets.
Goldman Sachs did not respond to our request for comment.
According to Reuters, the latest plans were made after Goldman reduced approximately 500 workers in September after having stopped the practice every year for the past two years due to the pandemic.
In July, the investment bank warned that it could slow down hiring and decrease expenses.
As Wall Street’s dealmaking boom wore off, global banks such as Morgan Stanley and Citigroup Inc. have had to reduce their staffing levels in recent months due to rising inflation, high interest rates and tensions between China and the United States.
