Goldman will cut thousands of employees as layoffs intensify on Wall Street

NEW YORK, Dec. 16 (Reuters) – Goldman Sachs Group (GS.N) He plans to lay off thousands of employees to navigate a tough economic environment, a source familiar with the matter said.

The layoffs are the latest sign of accelerating cuts across Wall Street as deal-making dries up. Investment banking revenues have fallen this year amid a slowdown in mergers and equity offerings, marking a stark reversal from a groundbreaking 2021 when bankers received big pay bumps.

Goldman Sachs had 49,100 employees at the end of the third quarter after adding large numbers of employees during the pandemic. The source said its number will remain higher than pre-pandemic levels. The workforce numbered 38,300 at the end of 2019, according to one document.

The source said the number of employees who will be affected by the layoffs is still under discussion, and details are expected to be finalized early next year.

A separate source familiar with the matter said the bank is considering sharply cutting its annual bonus pool this year. Reuters reported in January that this contrasts with increases of between 40% and 50% for the best-performing investment bankers in 2021, citing people with first-hand knowledge of the matter.

“GS needs to show that its costs are as variable as its revenues, especially after a year when it offered special bonuses to senior managers during boom times,” wrote Mike Mayo, banking analyst at Wells Fargo.

“Goldman Sachs now needs to show that it can do the same when business isn’t doing well and that they stick to the old Wall Street adage that they eat what they kill,” he said in a note.

The company’s shares fell 1.3% in afternoon trading, along with shares of JPMorgan and Chase (JPM.N) and Morgan Stanley (MS.N)which fell 0.6% and 1.3%, respectively.

Goldman shares have fallen about 10 percent this year. But it outperformed the broader S&P 500 banking index (.SPXBK)which is down 24% year-to-date.

The consumer bank is struggling

The latest plan would include cutting hundreds of employees out of Boldman’s consumer business, a source said.

The bank indicated it was curbing its ambitions on Marcus, its loss-making consumer unit, in October. A source familiar with the move told Reuters earlier this week that Goldman also plans to stop issuing unsecured consumer loans, in another sign that it will back down from the business.

CEO David Solomon, who took over the helm in 2018, has tried to diversify the company’s operations with Marcus. It was listed under Wealth Business in October as part of a management shakeup that also merged the commercial and investment banking units.

Commercial and investment banking transactions — Goldman’s traditional drivers of earnings — accounted for nearly 65% ​​of its revenue at the end of the third quarter, compared with 59% in the third quarter of 2018, when Solomon took over the top job.

Semaphore reported earlier Friday that Goldman will lay off up to 4,000 people as the bank struggles to meet profit targets, citing people familiar with the matter.

Goldman Sachs declined to comment.

The latest plans come after Goldman laid off about 500 employees in September, after halting the annual practice for two years during the pandemic, a source familiar with the matter told Reuters at the time.

The investment bank first warned in July that it could slow hiring and reduce expenses.

World banks, including Morgan Stanley (MS.N) City Group Inc (CN)has slashed its workforce in recent months as the dealmaking boom on Wall Street has faded due to rising interest rates, tensions between the United States and China, the war between Russia and Ukraine and soaring inflation.

(Report: Saeed Azhar and Nana Nguyen). Additional reporting by Noor Zainab Hussain and Mahnaz Yasmin in Bengaluru. Editing by Mark Porter

Our standards: Thomson Reuters Trust Principles.