Goldman to cut about 3,200 jobs this week after cost review: Source

Goldman is embarking on one of its biggest rounds of staff cuts ever, going deeper than rivals to shed jobs. PHOTO: REUTERS

NEW YORK - Goldman Sachs Group is embarking on one of its biggest rounds of staff cuts as it locks in on a plan to eliminate about 3,200 positions this week, with the bank’s leadership going deeper than rivals to shed jobs.

It is expected to start the process mid-week and the total number of people affected will not exceed 3,200, according to a person with knowledge of the matter. More than a third of those will likely be from within its core trading and banking units, indicating the broad nature of the cuts.

The firm is also poised to unveil financials tied to a new unit that houses its credit card and instalment lending business, which will record more than US$2 billion (S$2.7 billion) in pre-tax losses, the source said.

A spokesman for Goldman Sachs declined to comment.

The cuts in the investment bank are elevated by the inclusion of non-front-office roles that were added to divisional headcount in recent years. The bank still has plans to continue hiring, including inducting the regular analyst class later this year.

Under chief executive David Solomon, headcount has jumped 34 per cent since the end of 2018, climbing to more than 49,000 as at Sept 30, data shows. The scale of firings this year is also affected by the firm’s decision to mostly set aside its annual cut of underperformers during the pandemic.

Slowdowns in various business lines, an expensive foray into consumer banking, and an uncertain outlook for markets and the economy are prompting the bank to push down costs. Merger activity and fees from raising money for companies have taken a hit across Wall Street, and a slump in asset prices has eliminated another source of big gains for Goldman Sachs from just a year ago.

Those broader industry trends have been compounded by the bank’s mistakes in its retail banking foray, where losses piled up at a much faster rate than forecast through the year.

This has left the bank facing a 46 per cent drop in profits on about US$48 billion of revenue, according to analyst estimates.

Still, that revenue mark has been buoyed by its trading division, which will post another jump this year, helping the companywide figure notch its second-best performance on record.

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

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

Sharing the pain

The latest cuts represent an acknowledgment that even businesses that outperformed this year will also have to take the pain for a firmwide performance that is going to miss targets set for shareholders in a year of expense bleed.

The performance miss was particularly evident in the new unit called Platform Solutions, whose numbers stand out in the divisional breakdown. The more than US$2 billion hit there is magnified by lending-loss provisions, exacerbated by new accounting rules that force the firm to set aside more money as loan volumes grow.

“There are a variety of factors impacting the business landscape, including tightening monetary conditions that are slowing down economic activity,” Mr Solomon told employees at the year end.

“For our leadership team, the focus is on preparing the firm to weather these headwinds.”

The cuts also come a week before the bank’s traditional year-end compensation discussions. Even for those who remain at the firm, compensation figures are expected to tumble, especially within investment banking.

It is a stark contrast from last year, when employees were getting showered with big bonus increases and a select few were even granted special payouts.

At the time, Mr Solomon’s US$35 million compensation for 2021 put him alongside Morgan Stanley’s Mr James Gorman as the highest-paid CEO for a major US bank.

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