Goldman is about to embark on its biggest round of job cuts

Goldman Sachs Group Inc. has embarked on one of its biggest job cuts this week, locking in plans to eliminate about 3,200 positions.

The company is expected to begin the process by mid-week, and the total number of victims will not exceed 3,200, according to a person familiar with the matter. A third of them will remain within its core trading and banking divisions, indicating the breadth of the cuts. The company is poised to release funds tied to a new unit that will run its credit-card and installment-loan business, which will post a pretax loss of more than $2 billion, the people said, asking not to be identified speaking about personal information.

A spokesman for the New York-based company declined to comment. Cuts at its investment bank have been boosted in recent years by the addition of non-front-office roles added to division head numbers. The bank still has plans to continue hiring, including adding a regular analyst class later this year.

Under Chief Executive Officer David Solomon, headcount has risen 34% since the end of 2018, to more than 49,000 as of Sept. 30, the data shows. The scale of this year’s firings has been affected by the company’s decision to largely set aside annual layoffs for underperformers during the pandemic.

A slowdown in various business lines, an expensive consumer-banking initiative, and an uncertain outlook for markets and the economy are prompting banks to cut costs. Merger activity for companies and fees to raise money have been a hit across Wall Street, and a slump in asset prices has wiped out another source of big gains for Goldman from a year ago. Those broader industry trends were compounded by missteps in the bank’s retail-banking venture, where losses piled up much faster than forecast throughout the year.

The bank faced a 46% drop in profits, on revenue of about $48 billion, according to analyst estimates. However, that earnings mark has been buoyed by its trading division, which will register another improvement this year, helping the firm post its second-best performance.

The final job cut numbers are significantly lower than previous proposals in management positions that could eliminate nearly 4,000 jobs.

The last major exercise of this magnitude came after the collapse of Lehman Brothers in 2008. Goldman began plans to cut more than 3,000 jobs, or nearly 10% of its workforce at the time, and top executives elected to forego their bonuses.

Sharing the pain

The latest cuts acknowledge that even businesses that have performed well this year will have to take the pains of a firm level of performance that could miss targets set for shareholders in a year.

That performance miss was particularly evident in a new unit called Platform Solutions, whose numbers stood out in the segment breakdown. The more than $2 billion hit was magnified by loan-loss provisions, exacerbated by new accounting rules that force the company to set aside more cash as debt levels rise and ballooning costs.

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

The cuts also come a week before the bank’s traditional year-end compensation discussions. Compensation is also expected to drop even for those at the firm, particularly in investment banking.

This is a stark contrast from last year, when employees were showered with huge bonus hikes and a select few were even given special pay. At the time, Salomon’s $35 million compensation for 2021 tied him with Morgan Stanley’s James Gorman as the highest-paid CEO of a major U.S. bank.