NEW YORK, Dec 16 (Reuters) – Goldman Sachs Group Inc (GSN) It plans to cut thousands of employees to navigate the tough economic environment, a source familiar with the matter said.
The layoffs are the latest sign that cutbacks are accelerating as dealmaking dries up across Wall Street. Investment banking earnings have fallen amid a slowdown in mergers and equity offerings this year, marking a stark shift from a blockbuster 2021 in which bankers received huge pay raises.
Goldman Sachs had 49,100 employees at the end of the third quarter after adding a significant number of employees during the pandemic. The number is likely to be higher than pre-pandemic levels, the source said. The number of employees at the end of 2019 was 38,300.
The number of employees affected by the layoffs is still being discussed, and details are expected to be finalized early next year.
The bank is weighing a sharp cut in the annual bonus package this year, a separate source familiar with the matter said. That contrasts with a 40% to 50% increase for top-performing investment bankers in 2021, Reuters reported in January, citing people with direct knowledge of the matter.
Mike Mayo, a banking analyst at Wells Fargo, wrote that “GS needs to show that its expenses are as variable as its revenue, especially after a year of special rewards for top managers.”
“Goldman Sachs now needs to show that it can do the same when business isn’t great, and that they live up to the old Wall St. adage of ‘eating what kills,'” he said in a note.
Shares of the company fell 1.3% in afternoon trade, along with shares of JPMorgan & Chase Co. (JPM.N) and Morgan Stanley (MSN)It fell by 0.6% and 1.3% respectively.
Goldman shares are down nearly 10% this year. But they outperformed the broader S&P 500 banking index (.SPXBK)It is down 24% year to date.
Consumer Banking Struggle
The latest plan will cut hundreds of employees from Goldman’s consumer business, a source said.
The bank signaled in October that it was scaling back its ambitions for loss-making consumer unit Marcus. Goldman plans to stop originating unsecured consumer loans, a source familiar with the move told Reuters earlier this week, another sign of a retreat from the business.
CEO David Solomon, who took the helm in 2018, has sought to diversify the company’s operations with Marcus. It was placed under the wealth business in October as part of a management reshuffle that merged the commercial and investment banking units.
Trading and investment banking — the traditional drivers of Goldman’s profits — accounted for nearly 65% of its revenue at the end of the third quarter, up from 59% in the third quarter of 2018.
Earlier on Friday, Semafor reported that Goldman would cut 4,000 jobs as the bank struggles to meet profit targets, citing people familiar with the matter.
Goldman Sachs declined to comment.
The latest plans come after Goldman cut about 500 employees in September after suspending the annual practice for two years during the pandemic, a source familiar with the matter told Reuters at the time.
The investment bank warned as early as July that it would slow hiring and cut costs.
Global banks including Morgan Stanley (MSN) and Citigroup Inc (CN)High interest rates, tensions between the U.S. and China, war between Russia and Ukraine and rising inflation have cut Wall Street’s workforce in recent months.
Reporting by Saeed Azhar and Lananh Nguyen; Additional reporting by Noor Zainab Hussain and Mehnaz Yasmin in Bangalore; Editing by Mark Porter
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