Goldman Sachs prepares for layoffs as deal-making slows

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

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

Goldman typically revisits its head count every year, letting go of employees based on performance and to match the bank's needs. It had paused that programme during the pandemic, which also coincided with a record period for deal-making, when bankers complained of overwork. The programme typically lays off 1 per cent to 5 per cent 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 reinstating our annual performance review of our employee base at the end of the year."

The move comes as the Federal Reserve's effort to tame inflation by raising rates has cooled deal-making and raise concerns that the US economy will tip into recession. The war in Ukraine has added further uncertainty to the mix.

Goldman reported in July that its second-quarter profit had dropped nearly 50 per cent from a year earlier, to just under US$3 billion. Revenue from Goldman's investment banking division fell 41 per cent from the same period in 2021. The firm said its backlog of deals fell but did not say by how much. At the time, the bank said hiring for the rest of the year would slow.

Deal-making in the United States so far this year has totaled about US$1.2 billion, compared with US$2 billion a year ago, according to the data firm Dealogic. Initial public offerings raised about 95 per cent less through the first half of the year than the first half of last year, according to EY, an advisory firm. The number of deals has fallen about 73 per cent.

"No question that the market has gotten more challenging," David M Solomon, Goldman's chief executive, said on the call in July.

"We have made the decision to slow hiring velocity and reduce certain professional fees going forward," Solomon said. "We are keeping in mind, however, that while we're being disciplined about our expenses, we are not doing so to the detriment of our client franchise or our growth strategy.

Solomon's statements, which echo similar warnings from chief executives across Wall Street, were a far cry from last year's ebullience. Then, low interest rates and sky-high financial markets drove a deal frenzy that required banks to bring on new workers to help deal with the crushing deal volume.

"They just don't need as many bodies as they have," said Chris Connors, a vice president at Johnson Associates, a compensation consulting firm, referring to Wall Street banks more broadly. "Production has fallen off a cliff." NYTimes

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