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Goldman Sachs braces for layoffs as deal-making slows

by SuperiorInvest

Goldman Sachs is preparing for a round of layoffs that could come as early as next week, according to two people familiar with the plans who spoke on condition of anonymity because they were not authorized to speak publicly.

The job cuts will affect employees across the company, the people said.

Goldman typically reviews headcount each year and lays off employees based on performance and the needs of the bank. It suspended that program during the pandemic, which also coincided with a record deal-making period when bankers he complained about being overworked. The program typically lays off 1 to 5 percent of workers; this round of layoffs is likely to be at the lower end of that range, a person familiar with the matter said.

Goldman’s chief financial officer, Denis Coleman, told analysts in July that the bank was “probably resuming our annual review of the performance of our employee base at the end of the year.”

The move comes as the Federal Reserve’s push to tame inflation by raising rates has cooled deal-making and raised fears that the U.S. economy is headed for recession. The war in Ukraine added more uncertainty to the mix.

Goldman reported in July, its second-quarter profit fell nearly 50 percent from a year earlier to nearly $3 billion. Revenue from Goldman’s investment banking division fell 41 percent compared to the same period in 2021. The firm said its backlog fell, but did not say by how much. The bank said at the time that hiring would slow for the rest of the year.

Transactions in the United States totaled about $1.2 billion this year, compared with $2 billion a year ago, according to data firm Dealogic. Initial public offerings raised 95 percent less in the first half of the year than in the first half of last year, according to the consulting firm EY. The number of stores fell by 73 percent.

“There is no doubt that the market has become more challenging,” David M. Solomon, Goldman’s chief executive, said in July.

“We have decided to slow the pace of recruitment and reduce certain professional fees going forward,” Mr Solomon said. “However, we are mindful that while we are disciplined about our spending, we are not doing so at the expense of our client franchise or our growth strategy.”

Mr. Solomon’s statements, which echoed similar warnings from CEOs across Wall Street, were a far cry from last year’s exuberance. Low interest rates and sky-high financial markets then created a frenzy of deals that required banks to hire new workers.about helping to deal with the overwhelming volume of business.

Still, it can be difficult for executives across Wall Street to estimate the necessary size for layoffs. There are conflicting signals about the condition the US economy, with some estimating that it may already be in or about to enter a recession, while others believe there will be a slowdown but no contraction. And deal-making, which can return as quickly as it fades, has recently shown signs of optimism, as Porsche’s upcoming initial public offering, As a result, bankers have to worry about not having enough staff in case business roars again.

But for now, Wall Street banks may simply have too many deal makers.

“They just don’t need as many bodies as they have,” said Chris Connors, vice president of Johnson Associates, a compensation consulting firm. “Production has fallen off a cliff.”

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