Goldman Sachs makes ‘brutal’ job cuts in quest for lower costs

Goldman Sachs on Wednesday sacked bankers at its offices in cities from New York and London to Hong Kong, dismissing many employees without paying a bonus for work performed last year while giving some junior bankers 30 minutes to gather their belongings and leave.

The layoffs are the most concrete example of a deep cost-cutting drive at the Wall Street bank, as chief executive David Solomon tries to reduce expenses following several years of expansion and a slowdown in its investment banking business.

Goldman embarked on the process of cutting 3,200 jobs last week but a significant proportion of affected bankers were given their marching orders on Wednesday. The headcount reductions are equivalent to about 6.5 per cent of the bank’s roughly 49,000 employees.

Managers tasked with giving staff the bad news described the process as “brutal” and morale as “horrendous” as thousands of employees turned up to work unaware of their fates.

Some Goldman employees that were let go were given about half an hour to collect their coats and pack up their desks before their building access cards were deactivated, said people briefed on the process.

In London, some affected bankers decamped to the Harrild & Sons pub near the bank’s Plumtree Court offices, where they commiserated with co-workers turned ex-colleagues.

The pay-offs on offer to departing staff differed markedly, according to people briefed on the arrangements, although many bankers were let go without being paid a bonus for work they performed in 2022.

Many managing directors — the second most senior rank behind partner status — will be paid until the end of January and then given three months of paid gardening leave, the people said.

However, more junior employees — those at or below the vice-president level — were offered two months of severance pay, the people added.

In a statement on Wednesday, Goldman said it was a “difficult time for people leaving the firm”.

“We’re grateful for all our people’s contributions, and we’re providing support to ease their transitions. Our focus now is to appropriately size the firm for the opportunities ahead of us in a challenging macroeconomic environment,” the bank said.

New York-based Goldman must adhere to local requirements over how much notice it is required to give in the jurisdictions in which it operates.

The dismissals come after the number of Goldman employees grew by almost 30 per cent since the end of 2019, an expansion that reflected a rush of investment banking activity and a pandemic hiatus for the ritual cull of bankers that had taken place annually.

The bank is grappling with the prospect of a recession in the US and a sharp drop-off in investment banking activity. Solomon is also paring back Goldman’s lossmaking consumer banking ambitions following investor unease about spending at the division.

More bankers are expected to depart the group over the coming weeks after managers disclose the size of year-end bonuses for 2022. Investment bankers are braced for reduction of 40 per cent while traders have been told to expect flat or lower bonuses even after a strong performance last year owing to volatile financial markets.

Some Goldman employees are predicting that the disappointing bonus round will prompt a wave of resignations, helping the bank reduce costs without having to pay severance but also raising the prospect of the firm losing some of its top performers.

Banks often give employees a small bonus or none at all to send the message that it is time to start looking for a new job.

In a sign of broader worries on Wall Street about the trajectory for the US economy, BlackRock is also planning to cut 500 employees from its global workforce, the FT reported earlier on Wednesday.