Goldman Sachs prepares to cut up to 3,200 workers this week

Goldman Sachs is expected to cut around 3,200 jobs starting Wednesday as it braces for tough economic conditions, including recessions in many key markets.

The investment banking giant will cut about 6.5 percent of the jobs in its 49,000 workforce, cuts that will include reductions at its core banking and trading units, according to Bloomberg.

The company is also expected to cut hundreds of jobs from its money-losing consumer operation after shrinking its direct-to-consumer Marcus division.

It follows a dramatic slowdown in M&A trading as higher interest rates hit valuations, prompting Chief Executive Officer David Solomon to warn of impending layoffs in a memo last month.

Goldman Sachs shares have fallen 3% over the past month as the company braces for recession.

It’s unclear where the job cuts will occur, but the company’s largest presence is in the US, where it has more than 25 offices.

Goldman Sachs also has six offices in the UK, including in London, where it is believed to employ around 6,000 people, as well as in Birmingham and Milton Keynes.

Last month, CEO Solomon reportedly sent out a memo to staff by the end of the year, warning that headcount would be downsized in the new year.

“We are conducting a careful review and, while discussions are still ongoing, we anticipate that our reduction in staff will take place in the first half of January,” Solomon said in the memo, according to Bloomberg.

‘There are a variety of factors affecting the business outlook, including tightening monetary conditions that are slowing economic activity. For our leadership team, the focus is on preparing the company to weather these headwinds,” he added.

Goldman Sachs had significantly increased its workforce since 2020 as it sought growth opportunities following the pandemic.

Even if Goldman Sachs cuts its workforce by 3,200 employees, it would still have more employees than in 2021

Banks generated nearly $71 billion in investment banking revenue in the US last year, according to Dealogic. Investment banking revenue in the United States is expected to have fallen more than 50 percent from last year.

However, institutional banks have been affected by a significant slowdown in activity in recent months due to the volatility of global financial markets.

Annual bonus season will kick off this week when JP Morgan, Citi and Bank of America report their results for last year.

The drop in deal activity is expected to result in a sharp drop in bonus payments.

In December, the Financial Times reported that Goldman Sachs was considering cutting its bonus fund for investment bankers by at least 40 percent this year as it seeks to keep costs in check.

Goldman Sachs is due to report its own fourth-quarter numbers on January 17. The company declined to comment.

A tumultuous year follows for the investment bank, which has seen its share price fall 12.8 percent in the past 12 months.

Morgan Stanley and Citigroup have also carried out recent layoffs, as the banking giants return to the annual ‘underperforming’ culls that were common before the pandemic.

Goldman Sachs headquarters is seen above. The bank is bracing for layoffs, following job cuts at Morgan Stanley and Citigroup

Most investment banks cut the bottom 1 to 5 percent of employees just before bonus time, to free up more bonus cash for those who stay.

Even if Goldman Sachs cuts its workforce by 3,200 employees, it would still have more employees than in 2021.

The company has been in something of a hiring spree since Solomon took over in 2018, when Goldman Sachs retained 36,300 employee positions, the same as the year before.

The workforce then increased to 38,300 in 2019 and 40,500 the following year. After reaching 43,900 in 2021, the number rose by more than 5,000, one of the biggest spikes in the bank’s recent history.

Solomon, however, previously warned that the bank needed to cut costs, with the impending downsizing among long-planned initiatives to save money.

“We continue to see headwinds on our expense lines, particularly in the near term,” Solomon said while speaking at a conference last month. “We have put some cost mitigation plans in place, but it will take some time to see the benefits.

“Ultimately, we will continue to be agile and scale the company to reflect the opportunity set.”