Goldman plans round of lay-offs as dealmaking dries up

Goldman Sachs is planning to implement a round of lay-offs in the coming weeks that threatens to result in hundreds of job losses among the bank’s employees, according to a person briefed on the matter.

In a sign of the dealmaking slowdown on Wall Street, Goldman will restart its annual cull of underperforming bankers, which it paused during the pandemic at a time when banks were struggling to keep up with the workload.

The process typically results in between 1 and 5 per cent of company-wide employees losing their jobs, with the impending review set to result in lay-offs towards the lower end of that range, the person said.

At the end of June, Goldman had about 47,000 employees across investment banking, trading, asset and wealth management, consumer banking and operational functions.

A Goldman spokeswoman declined to comment. The lay-offs were first reported by the New York Times on Monday.

Goldman finance chief Denis Coleman had telegraphed the lay-offs in July when he said the bank was looking at ways to cut costs, including reintroducing the year-end performance review of its employees.

The Financial Times previously reported that Goldman had paused hiring some replacements for departing bankers.

The planned lay-offs are indicative of broader concerns in finance of job cuts amid a drop-off in dealmaking activity and a slowdown in economic growth in the US and Europe.

It reflects the feast-or-famine nature of the banking industry, with the planned cull coming after a blockbuster year of profits in 2021 for the sector.

In investment banking, Goldman’s revenues in the first six months of 2022 were down 38 per cent year on year, a smaller drop than at peers JPMorgan Chase and Morgan Stanley. Revenues have fallen 83 per cent in asset management, while the bank is conducting a review of its lossmaking consumer division.

The drop-off has been particularly acute on equity capital markets desks as stock market listings have dried up.

One bright spot has been Goldman’s trading division, where revenues are up 15 per cent year on year and accounted for almost three-quarters of Goldman’s total net revenues in the first six months of 2022.

Compensation and benefits are the biggest expense item for banks such as Goldman. For its revenue-generating employees, the bulk of pay typically comes in the form of year-end bonuses, giving the bank flexibility to lower costs in a fallow year.

However, adjustments in variable pay are often accompanied by laying off employees who are ranked poorly by managers.

At Goldman, compensation and benefits were down 31 per cent year-on year-in the first six months of 2022, a steeper drop than the 25 per cent fall in net revenues.

Morgan Stanley chief executive James Gorman said in July that the bank’s “ultimate weapon” to manage a slowdown is pay.