Economy

Goldman Sachs will cut 3,200 jobs this week in its biggest round of layoffs

Goldman Sachs Group Inc has embarked on one of its biggest rounds of job cuts on record as it maintains a plan to eliminate about 3,200 positions this week, with the bank’s management going deeper than rivals to shed jobs.

The firm is expected to start 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 tied to a new unit housing its credit card and installment lending business, which will absorb more than $2 billion in pretax losses, the people said, asking not to be identified discussing private information.

A spokesman for the New York-based company declined to comment. The cuts in its investment bank are heightened by the inclusion of the non-front office roles that were added to the department’s staff in recent years. The bank still plans to continue hiring, including taking on the regular analyst class later this year.

Under CEO David Solomon, the number of employees has increased by 34 percent since the end of 2018, rising to more than 49,000 per year. September 30, data shows. The scale of layoffs this year is also influenced by the firm’s decision to mostly set aside its annual cut of underperformers during the pandemic.

Slowdowns in various business areas, expensive spending in consumer banks and uncertain prospects for markets and the economy are causing the bank to lower costs. Merger activity and fees from raising money for companies have hit across Wall Street, and a drop in asset prices has eliminated another source of big gains for Goldman from just a year ago. These broader industry trends have been compounded by the bank’s failure in its retail banking growth, with losses piling up at a much faster rate than expected during the year.

That has left the bank facing a 46 percent drop in profits on about $48 billion in revenue, according to analyst estimates. Still, that revenue mark has been boosted by its trading division, which will post another jump this year, helping the entire company post its second-best performance ever.

The final job reduction figure is significantly lower than previous 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 had begun a plan to cut more than 3,000 jobs, or nearly 10 percent of its workforce at the time, and top executives chose to forgo their bonuses.

To share the pain

The latest cuts represent a recognition that even companies that outperformed this year will also have to take the pain of a company-wide performance that is going to miss targets set for shareholders in a year of spending bleeding.

This performance miss was particularly evident in the new unit called Platform Solutions, whose numbers stand out in the division breakdown. The more than $2 billion hit there is magnified by provisions for loan losses, exacerbated by new accounting rules that force the company to set aside more money as loan volumes grow 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 management team, the focus is on preparing the company to weather this headwind.”

The cuts also come a week before the bank’s traditional year-end compensation discussions. Even for those who remain at the firm, compensation numbers are expected to decline, particularly in investment banking.

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

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