NY, NWE: With a plan to eliminate approximately 3,200 positions this week, Goldman Sachs Group Inc. is embarking on one of its largest rounds of job cuts ever, with the bank's leadership going further than rivals to shed employees.
According to a person with knowledge of the situation, the company is anticipated to begin the process in the middle of the week, and the total number of individuals affected will not exceed 3,200. Its core trading and banking divisions will likely account for more than a third of those, indicating the extensive nature of the cuts. According to the individuals, who asked not to be identified because they were discussing confidential information, the company is also likely to announce financials associated with a new unit that houses its installment-lending and credit card businesses. According to the individuals, the unit will record more than $2 billion in pretax losses.
The company's spokesperson declined to provide any additional information. The inclusion of non-front-office positions that have been added to divisional headcount in recent years adds to the investment bank's reductions. The bank still intends to hire, including the regular analyst class's induction later this year.
According to data, headcount has increased by 34% since the end of 2018 under Chief Executive Officer David Solomon, reaching over 49,000 as of Sept. 30. The company's decision to mostly save its annual cut of underperformers during the pandemic has an impact on the magnitude of the firings this year.
The bank is cutting costs as a result of various business line slowdowns, a costly venture into consumer banking, and an uncertain outlook for markets and the economy. Wall Street's merger activity and fees from companies raising money have declined, and Goldman's previous year's significant gains have been eliminated by a decline in asset prices. The bank's mistakes in its retail-banking venture, in which losses accrued at a much faster rate than anticipated throughout the year, have added to these broader industry trends.
Analyst estimates indicate that this has resulted in the bank seeing a 46% decline in profits on approximately $48 billion in revenue. Nevertheless, the trading division's continued growth this year will help the company's overall figure achieve its second-best performance ever.
The final number of job cuts is significantly lower than the nearly 4,000 jobs that could have been cut in management-level proposals.
After Lehman Brothers' demise in 2008, this scale performed its last significant exercise. At the time, Goldman was planning to eliminate over 3,000 jobs, or nearly 10% of its workforce, and top executives decided not to accept bonuses.
Sharing the pain The most recent reductions are an acknowledgement that even businesses that performed well this year will have to bear the consequences of a firm-wide performance that will fall short of shareholder targets in a year of spending cuts.
The new unit known as Platform Solutions, whose numbers stand out in the divisional breakdown, was particularly affected by this performance deficiency. Lending-loss provisions and new accounting rules, which require the company to set aside more money as loan volumes rise and expenses rise, compound the more than $2 billion hit there.
Solomon told staff at the end of the year, "There are a variety of factors impacting the business landscape, including tightening monetary conditions that are slowing down economic activity." The focus of our leadership team is on preparing the business to face these challenges.
Additionally, the reductions occur a week prior to the usual year-end compensation discussions at the bank. Compensation figures are expected to fall even for employees who stay with the company, especially in investment banking.
It is a stark contrast to the previous year, when employees were lavished with substantial bonus increases, with a select few receiving special payouts. At the time, Solomon's salary of $35 million for 2021 made him and James Gorman of Morgan Stanley the highest-paid CEOs of major US banks.