Business

Goldman will cut around 3,200 jobs this week following a cost review

The company is expected to begin the process mid-week.

Goldman Sachs Group Inc. is embarking on one of its biggest rounds of job cuts ever, as it finalized a plan this week to eliminate around 3,200 jobs, with the bank’s management going deeper than rivals to shed jobs.

The firm is expected to begin the process by midweek, and the total number of people affected will not exceed 3,200, according to a person familiar with the matter. More than a third of these are likely to be from its core trading and banking units, indicating the broad nature of the cuts. The firm is also poised to disclose financials related to a new unit that houses its credit cards and installment loans, which will record more than $2 billion in pretax losses, the people said, asking not to be identified to discuss private information. .

A spokesman for the New York-based company declined to comment. The cuts at its investment bank were compounded by the inclusion of non-front-office roles that have been added to the division’s headcount in recent years. The bank still plans to continue hiring, including introducing a regular class of analysts later this year.

Under Chief Executive Officer David Solomon, headcount jumped 34% since the end of 2018, rising to more than 49,000 as of Sept. 30, the data showed. The volume of layoffs this year is also influenced by the company’s decision to largely shelve its annual reduction of poor results during the pandemic.

Slowdowns in various business lines, an expensive attempt at consumer banking and an uncertain outlook for markets and the economy are prompting the bank to cut costs. Merger activity and fees from raising money for companies have hit Wall Street, and falling asset prices have eliminated another source of big gains for Goldman from just a year ago. These broader industry trends were compounded by the bank’s missteps in its foray into the retail business, where losses piled up at a much faster rate than anticipated during the year.

As a result, the bank is facing a 46 percent drop in profits, to about $48 billion in revenue, according to analysts’ estimates. However, that revenue mark was boosted by its trading division which is set to post another jump this year, helping the firm-wide figure post its second-best performance on record.

The final job cut figure is significantly lower than earlier proposals in the management ranks that could have eliminated nearly 4,000 jobs.

The last major exercise on this scale followed the collapse of Lehman Brothers in 2008. Goldman embarked on a plan to cut more than 3,000 jobs, or nearly 10% of its workforce at the time, and top executives chose to forgo their bonuses.

Sharing the pain

The latest cuts are an acknowledgment that even companies that have outperformed this year will have to bear the pain of a company-wide performance that misses targets set for shareholders in the spending year.

That performance slip was particularly evident in a new unit called Platform Solutions, whose numbers stand out in the divisional breakdown. The more than $2 billion hit there was inflated by loan loss provisions, exacerbated by new accounting rules that force the firm to set aside more cash as loan volume grows and costs rise.

“There are a number of factors affecting the business landscape, including tightening monetary conditions that are slowing economic activity,” Solomon told staff at the end of the year. “For our leadership team, the focus is on preparing the firm to weather these headwinds.”

The cut comes a week before the bank’s traditional end-of-year compensation talks. Even for those who remain at the firm, compensation figures are expected to fall, particularly within investment banking.

That’s a stark contrast to last year, when employees were showered with big bonus increases and a select few were even granted special payouts. At the time, Solomon’s $35 million compensation for 2021 put him alongside Morgan Stanley’s James Gorman as the highest-paid CEO of a major U.S. bank.

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