Goldman Sachs Group Inc. is embarking on one of its biggest-ever job cuts as it finalizes plans to eliminate about 3,200 positions this week, with bank management set to go deeper than rivals to cut jobs.
The company expects to start the process midweek, 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 that will likely come from its core banking and commerce units, underscoring the broad nature of the cuts. The company is also ready to disclose the financials attached to a new unit of its credit card and installment lending businesses that will record a pre-tax loss of more than $2 billion, the people asked not to be named. discuss personal information said.
A spokesperson for the New York-based company declined to comment. Cuts in its investment banking are increased by including non-front office roles that have been added to the department’s headcount in recent years. The bank still plans to continue hiring, including the introduction of a regular analytics class later this year.
The data shows that under CEO David Solomon, headcount has grown by 34% since the end of 2018, to more than 49,000 as of September 30. The size of layoffs this year has also been dwarfed. affected by the company’s decision to give most of its annual cuts to underperformers during the pandemic.
A slowdown in various business lines, an expensive breakthrough in consumer banking and an uncertain outlook for markets and the economy are forcing banks to reduce costs. Mergers and fees from crowdfunding have hit Wall Street, and the decline in asset prices has eliminated another big source of profit for Goldman from just a year ago. These broader industry trends have been compounded by the bank’s missteps in its foray into retail banking, where losses piled up at a much faster rate than forecast for the full year. .
That left the bank facing a 46 percent drop in profits, on about $48 billion in revenue, analysts estimate. However, that revenue milestone has been supported by its trading division which will take another leap this year, giving the company-wide number the second-best performer in history.
The final number of job cuts was significantly lower than previous proposals in the management level that would have eliminated nearly 4,000 jobs.
The last major exercise of this scale came after 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 voted to waive their bonuses.
The latest cuts represent a recognition that even businesses that have performed well this year will suffer as company-wide performance will fall short of targets set for the year. shareholders in a year of cost-cutting.
That lack of performance is especially evident in the new unit called Platform Solutions, whose numbers stand out in the division breakdown. Losses of more than $2 billion were magnified by provisions for loan losses, exacerbated by new accounting rules that forced the company to spend more money as loan volumes increased as well as expenses. enlarged.
“There are many factors impacting 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 company to weather these headwinds.”
The cuts also come a week before the bank’s traditional year-end compensation discussions. Even for those staying at the company, compensation figures are expected to drop, especially in the investment banking sector.
It’s a stark contrast from last year, when employees received massive bonus increases and a select few were even granted special payouts. At the time, Solomon’s $35 million compensation for 2021 made him, along with James Gorman of Morgan Stanley, the highest-paid CEO for a major US bank.
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