Goldman to cut thousands of staff as Wall Street layoffs intensify –source

New York, Dec. 17 (BNA): Goldman Sachs Group intends to cut thousands of employees to deal with a difficult economic environment, according to a source familiar with the matter.

The layoffs are the latest sign of accelerating cuts across Wall Street as deal-making dries up. Investment banking revenues have fallen this year amid a slowdown in mergers and equity offerings, marking a stark reversal from 2021 when bankers received big pay jumps.

Goldman Sachs had 49,100 employees at the end of the third quarter after adding large numbers of employees during the pandemic. Their number will remain higher than pre-pandemic levels, the source said. The workforce numbered 38,300 at the end of 2019, according to one document.

The source said the number of employees who will be affected by the layoffs is still under discussion, and details are expected to be finalized early next year.

A separate source familiar with the matter said the bank is considering sharply cutting its annual bonus pool this year. Reuters reported in January that this contrasts with increases of 40% to 50% for the best-performing investment bankers in 2021, citing people with first-hand knowledge of the matter.

“GS needs to show that its costs are as variable as its revenues, especially after a year when it offered special bonuses to senior managers during boom times,” wrote Mike Mayo, banking analyst at Wells Fargo.

“Goldman Sachs now needs to show that it can do the same when business is not good, and that they stick to the old Wall Street adage that they eat what they kill,” he said in a note.

The company’s shares fell 1.3% in afternoon trading, along with shares of JPMorgan & Chase Co (JPM.N) and Morgan Stanley (MS.N), which fell 0.6% and 1.3%, respectively.

Goldman shares have fallen about 10 percent this year. But it has outperformed the broader S&P 500 (.SPXBK) banking index, which is down 24% since the start of the year.

The latest plan would include cutting hundreds of employees out of Boldman’s consumer business, a source said.

The bank indicated it was curbing its ambitions for Marcus, its loss-making consumer unit, in October. A source early this week told Reuters earlier this week that Goldman also plans to stop issuing unsecured consumer loans, in another sign that it will back down from the business.

CEO David Solomon, who took the helm in 2018, has tried to diversify the company’s operations with Marcus. It was placed under the wealth business in October as part of a management shake-up that also consolidated its commercial and investment banking units.

Commercial and investment banking transactions — Goldman’s traditional drivers of earnings — made up nearly 65% ​​of its revenue at the end of the third quarter, compared with 59% in the third quarter of 2018, when Solomon took over the top job.

Semaphore reported earlier Friday that Goldman will lay off up to 4,000 people 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 laid off about 500 employees in September, after halting the annual practice for two years during the pandemic, a source familiar with the matter told Reuters at the time.

The investment bank first warned in July that it could slow hiring and reduce expenses.

Global banks, including Morgan Stanley (MS.N) and Citigroup Inc (CN), have slashed their workforces in recent months as the dealmaking boom on Wall Street fades due to rising interest rates, tensions between the United States and China, and war. Between Russia and Ukraine, high inflation.

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