Goldman Sachs prepares to lay off as deal-making slows

Goldman Sachs is preparing for a round of layoffs that may come as soon as next week, according to two people familiar with the plans, who spoke on condition of anonymity because they are not authorized to speak publicly.

People said the job cuts would affect employees across the company.

Goldman typically revises the number of its bosses each year, and leaves staff based on performance and the bank’s needs. I paused this program during the pandemic, which also coincided with a record deal-making period, when bankers were complained of fatigue. The program usually allocates 1 to 5 percent of workers; This round of layoffs is likely at the lower end of that range, a person familiar with the matter said.

Goldman’s chief financial officer, Dennis Coleman, told analysts in July that the bank “may re-review our annual performance of our employee base at the end of the year.”

The move comes as the Federal Reserve’s efforts to tame inflation by raising interest rates are cooling deal-making and raising fears that the US economy will slip into recession. The war in Ukraine added more uncertainty to the mix.

Goldman mentioned In July, its second-quarter profit was down nearly 50 percent from a year earlier, to just under $3 billion. Revenue from Goldman’s investment banking division fell 41 percent compared to the same period in 2021. The company said its deal backlog fell, but did not say how much. At the time, the bank said hiring for the rest of the year would slow.

Deals in the US so far this year total about $1.2 billion, compared to $2 billion a year ago, according to data firm Dealogic. Initial public offerings increased 95 percent less during the first half of the year than in the first half of last year, According to EY Advisory. The number of deals decreased by 73 percent.

“There is no doubt that the market has become more challenging,” Goldman CEO David Solomon said on the call in July.

“We have made the decision to slow down the pace of recruitment and reduce certain professional fees in the future,” said Mr. Solomon. “However, we keep in mind that while we are disciplined about our expenses, we are not doing so at the expense of our clients’ privilege or our growth strategy.”

Solomon’s remarks, which echoed similar warnings from CEOs across Wall Street, were a far cry from last year’s enthusiasm. Then, low interest rates and high financial markets led to a deal frenzy that required banks to bring in new workerso Assist in dealing with the overwhelming deal volume.

However, for executives across Wall Street, assessing the scale needed for layoffs can be difficult. There are conflicting signs about the condition US economy, with some estimating that it may already be in a recession, or about to enter it, while others believe there will be a slowdown but not a downturn. Deal-making, which could return as quickly as it fades, has shown recent signs of optimism, Like Porsche’s upcoming initial public offering, This makes bankers wary of finding themselves understaffed if deals start to buzz again.

But right now, Wall Street banks may have too many deal makers.

They don’t need as many bodies as they have,” said Chris Connors, vice president of Johnson Associates, a compensation consultancy. “Production has fallen off a cliff.”