Goldman embarks on one of its biggest career tours ever

Goldman Sachs Group Inc. In one of its biggest rounds of job cuts ever, it is sticking to a plan to cut about 3,200 jobs this week, with the bank driving deeper than rivals to shed jobs.

The company is expected to start the process 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 those are likely to be within core trading and banking units, indicating the broad nature of the cuts. The people, who asked not to be identified discussing private information, said the company is also preparing to disclose financial data associated with a new unit that includes its credit card and installment lending business, which will record more than $2 billion in pretax losses.

A spokesperson for the New York-based company declined to comment. Cuts in its investment bank have been lifted by the inclusion of non-front office roles that have been added to divisional headcounts in recent years. The bank still has plans to continue hiring, including hiring the regular analyst class later this year.

Under CEO David Solomon, headcount has jumped 34% since the end of 2018, rising to more than 49,000 as of Sept. 30, according to the data. The amount of shootings this year is also affected by the company’s decision to forgo its annual underperformance cut during the pandemic.

A slowdown in various lines of business, a costly consumer banking foray, and an uncertain outlook for markets and the economy are driving the bank to cut costs. Merger activity and corporate fund-raising fees have been hurting across Wall Street, and falling asset prices have wiped out another source of big gains for Goldman from just a year ago. Broader industry trends were exacerbated by the bank’s foray into retail banking as losses accumulated at a much faster rate than expected during the year.

That left the bank facing a 46% drop in profits, and revenues of about $48 billion, according to analyst estimates. However, that revenue mark was buoyed by the trading division, which will take another jump this year, helping the company-wide number to its second-best performance ever.

The final number of job cuts is well below previous proposals at management ranks that would have eliminated nearly 4,000 jobs.

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

Pain sharing

The latest cuts are an acknowledgment that even companies that have outperformed this year will also have to take the pain of company-wide performance that will miss targets set for shareholders in a year of depleted expenses.

The performance loss was particularly evident in the new unit called Platform Solutions, whose numbers stand out in the breakdown of divisions. The hit of more than $2 billion is compounded by provisions for lending and losses, exacerbated by new accounting rules that force the company to set aside more money as loan volumes grow as well as balloon expenses.

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

The cuts also come a week ahead of the bank’s traditional year-end compensation discussions. Even for those who remain with the company, compensation numbers are expected to come down, especially in investment banking.

It’s a stark contrast from last year, when employees were showered with big bonus increases and a select few were given 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 US bank.