Goldman Sachs bankers presumably will know within two weeks whether the cost-cutting bell tolls for them.
The bank’s headcount reduction — reported last month to encompass up to 4,000 employees — “will take place in the first half of January,” CEO David Solomon said in a year-end voicemail message to staff, according to Bloomberg and the Financial Times.
“There are a variety of factors impacting the business landscape, including tightening monetary conditions that are slowing down economic activity,” Solomon said. “For our leadership team, the focus is on preparing the firm to weather these headwinds.”
Goldman will announce its fourth-quarter earnings Jan. 17. Analysts have predicted the bank’s adjusted annual profit for 2022 may have dropped by 44%, Bloomberg reported. Still, the bank, late last month, was set to close out the year having generated $48 billion in revenue — second to 2021, according to the wire service.
“We need to proceed with caution and manage our resources wisely,” Solomon said, emphasizing that the bank is “conducting a careful review” and that “discussions are still ongoing.”
Goldman President John Waldron defended the bank’s cost-cutting strategy in an interview with the Financial Times.
“Everyone I know in my job or David’s job is doing the same thing,” Waldron told the publication. “The forecast is more challenging. We may be wrong, we may get a soft landing and we’ll staff up again.”
Waldron did not comment on the depth of staff cuts or the potential severity of bonus cuts.
Goldman is considering reducing the bonus pool for traders by a low double-digit percentage, Bloomberg reported last month. But the bank also may give no bonus to 100 or more of its lowest performers — a sign that the bankers’ jobs may be at risk.
“I’m dreading the conversations I’m going to have with my team,” one Goldman banker told the Financial Times.
Waldron asserted that employees should look at compensation over a longer window, noting that the bank’s bonuses last year topped those of many of its competitors.
“Our people knew coming into [2022], in a normalized year, bonuses would be down. But if you look at the two-year average, they will have made more,” Waldron said.
January job cuts — ahead of Goldman’s scheduled investor day in February — would give the bank a new baseline upon which to frame profitability goals it revamped nearly a year ago.
Since the start of the COVID-19 pandemic, Goldman added staff at roughly twice the pace of the banking industry writ large, Wells Fargo analyst Mike Mayo has said. Headcount jumped by 20% between the first quarter of 2020 and the third quarter of 2022, he said, according to the Financial Times.
Still, some of the departures this month will be voluntary.
“We’ll probably have to rebuild [parts of] the business next year with the attrition,” a senior Goldman banker told the Financial Times. “[Solomon] wants to run the business as lean as he can. He’s taking some real risk around that.”
Waldron, though, said the banking industry is not alone in looking at staff cuts.
“Most companies I talk to, financial services or otherwise, are not only not hiring but also reducing headcount,” he said.
