Goldman to cut around 3,200 jobs this week after cost review

Goldman Sachs Group Inc. embarks on one of its biggest rounds of job cuts yet as it locks in a plan to cut around 3,200 jobs this week, with the bank’s leadership going further than its rivals to cut jobs.

The firm is expected to start the process mid-week 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 them are likely to come from its core business and banking units, indicating the widespread nature of the cuts. The company is also set to release financials related to a new unit that houses its credit card and installment loan businesses, which will see more than $2 billion in pretax losses, the sources said, asking not to be identified when discussing private information.

A spokesperson for the New York-based company declined to comment. Cuts to its investment bank are bolstered by the inclusion of the non-front office roles that have been added to the division’s workforce in recent years. The bank still plans to continue hiring, including the induction into the regular class of analysts later this year.

Under chief executive David Solomon, membership has jumped 34% since the end of 2018, reaching more than 49,000 as of September 30, the data shows. The scale of the layoffs this year is also affected by the company’s decision to set aside mostly its annual reduction of underperformers during the pandemic.

Slowdowns in various business sectors, a costly foray into retail banking and an uncertain outlook for markets and the economy are prompting the bank to cut costs. Merger activity and corporate fundraising fees have taken a hit on Wall Street, and a slump in asset prices wiped out another source of big gains for Goldman just a year ago. These broader industry trends were compounded by the bank’s mistakes in its foray into retail banking, where losses piled up at a much faster rate than expected throughout the year.

That left the bank facing a 46% drop in profits, on about $48 billion in revenue, according to analysts’ estimates. Still, that revenue brand was buoyed by its business division which will post another jump this year, helping the company-wide figure to its second-best performance ever.

The final job cut figure is significantly lower than earlier proposals in the management ranks which could have cut nearly 4,000 jobs.

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

share the pain

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

This lack of performance was particularly evident in the new unit called Platform Solutions, whose numbers stand out in the breakdown by division. The more than $2 billion hit there is magnified by loan loss provisions, exacerbated by new accounting rules that require the company to set aside more money as loan volumes grow as well as skyrocketing spending.

“There are a variety of factors impacting the business landscape, including tighter monetary conditions that are slowing economic activity,” Solomon told staff at year-end. “For our leadership team, the focus is on preparing the business for these headwinds.”

The cuts also come a week before the bank’s traditional year-end pay talks. Even for those who remain in the company, compensation figures are expected to fall, especially in investment banking.

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