Goldman Sachs Group Inc is planning to lay off thousands of employees in order to navigate a difficult economic environment, according to a source familiar with the matter.
The layoffs are the latest indication that layoffs are spreading across Wall Street as dealmaking slows. Investment banking revenues have fallen this year due to a slowdown in mergers and stock offerings, a sharp contrast to the blockbuster 2021, when bankers received large pay raises.
Goldman Sachs had 49,100 employees at the end of the third quarter, after hiring heavily during the pandemic. According to the source, its headcount will remain above pre-pandemic levels. According to a filing, the workforce stood at 38,300 at the end of 2019.
The number of employees affected by the layoffs is still being discussed, and the details are expected to be finalized early next year, according to the source.
According to a separate source familiar with the situation, the bank is considering a significant reduction in the annual bonus pool this year. This compares to increases of 40% to 50% for top-performing investment bankers in 2021, according to Reuters, citing people with direct knowledge of the situation.
“GS needs to show that its costs are as variable as its revenues, especially after a year when it provided special rewards to top managers during the boom times,” wrote Mike Mayo, a banking analyst at Wells Fargo.
“Goldman Sachs now needs to show that it can do the same when business is not as good and that they live up to the old Wall St. adage that they ‘eat what they kill,'” he said in a note.
In afternoon trading on Friday, shares of JPMorgan & Chase Co fell 1.3%, while shares of Morgan Stanley fell 0.6% and 1.3%, respectively.
This year, Goldman’s stock has dropped nearly 10%. They have, however, outperformed the S&P 500 bank index, which is down 24% year to date.
According to a source, the latest plan would result in the layoff of hundreds of employees from Goldman’s consumer business.
In October, the bank signaled that it was scaling back its plans for Marcus, its loss-making consumer unit. Goldman also intends to discontinue the origination of unsecured consumer loans, a source familiar with the matter told Reuters earlier this week, indicating yet another exit from the industry.
With Marcus, Chief Executive Officer David Solomon, who took over in 2018, has attempted to diversify the company’s operations. In October, it was merged with the wealth business as part of a management reshuffle that also included the trading and investment banking units.
Trading and investment banking accounted for nearly 65% of Goldman’s revenue at the end of the third quarter, compared to 59% in the third quarter of 2018, when Solomon took over as CEO.
According to people familiar with the situation, Semafor earlier on Friday reported that Goldman will lay off up to 4,000 employees as the bank struggles to meet profit targets.
There was no comment on the issue from Goldman Sachs.
Goldman cut about 500 employees in September after pausing the annual practice for two years due to the pandemic, according to a source familiar with the matter at the time.
In July, the investment bank warned that it might slow hiring and cut costs.
Global banks, including Morgan Stanley and Citigroup Inc, have reduced their workforces in recent months as a dealmaking boom on Wall Street has cooled due to high interest rates, tensions between the US and China, the Russia-Ukraine war, and soaring inflation.
(Adapted from Reuters.com)