The Goldman Sachs chief has told employees he will cut jobs early next month as the US investment bank seeks to improve earnings amid concerns about the global economy.
The bank is reportedly considering cutting about 8% of its 49,000 staff, which could equate to the loss of up to 4,000 jobs. It is also believed to be considering cuts to its bonus pool of up to 40%.
Its chief executive, David Solomon, said the bank was preparing for slower economic growth as central banks hike interest rates, in an annually taped year-end message to employees, first reported by Bloomberg News.
Solomon said: “We are conducting a careful review and while talks are still ongoing, we anticipate our downsizing will take place in the first half of January.”
Investment banks had enjoyed a boom year in 2021 as companies embarked on a huge wave of mergers and acquisitions following lockdown from the coronavirus pandemic. Goldman Sachs and other banks expanded to take advantage, but the number of lucrative deals dwindled in 2022 amid rising interest rates around the world.
“There are a variety of factors affecting the business landscape, including tightening monetary conditions that are slowing economic activity,” Solomon said in the statement. “For our leadership team, the focus is on preparing the company to weather these headwinds.”
Goldman continues to be forecast for strong earnings this year and next. Analysts polled by S&P Global Market Intelligence forecast net income of $12bn (£10bn) in 2022 and $13bn in 2023.
That would be bigger than any year since the global financial crisis in 2009, barring record profits of 21 billion like Morgan Stanley. The stock price has fallen 14% in 2022.
Completing the job cuts in the first half of January would allow Goldman executives to present them to investors on Jan. 17, when the bank is due to report its full-year 2022 results. Solomon will then also be speaking to investors in February about a restructuring plan it announced in October to try to improve its profitability.
That plan — the second major reorganization during Solomon’s four-year tenure as CEO — will involve merging two asset and wealth management divisions that he previously separated in 2019 and a retreat from his efforts to continue under the Marcus brand to expand into consumer banking.
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The bank’s investment strategists predict that better prospects for companies may be a long way off. There will be “more volatility and declines during this bear market before bottoming out later in 2023” as interest rates peak and the worst of the expected recessions in economies around the world pass, they said.
Goldman Sachs declined to comment.
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