Goldman Sachs Group will undergo one of its largest rounds of layoffs with a plan to eliminate around 3,200 jobs right at the start of 2023. According to Bloomberg:
More than a third of [layoffs] will likely be from within its core trading and banking units. ... Slowdowns in various business lines, an expensive consumer-banking foray, and an uncertain outlook for markets and the economy are prompting the bank to batten down costs.
The final number of cuts will be less than the proposals made from the upper management ranks, which would have eliminated almost 4,000 jobs.
Forty-six percent drop in profits
Since the end of 2018, under the leadership of CEO, David Solomon, Goldman Sachs' workforce increased by 34%, amounting to more than 49,000 employees. During the pandemic, the company implemented an annual evaluation of underperforming workers. Therefore, the magnitude of layoffs this year may also have been driven by the company's decision to continue with this plan. According to Solomon:
There are a variety of factors impacting the business landscape, including tightening monetary conditions that are slowing down economic activity. For our leadership team, the focus is on preparing the firm to weather these headwinds.
Falling asset prices on Wall Street have eliminated another large source of profits for Goldman from a year ago. In addition, the decline has been compounded by errors in its foray into retail banking, where losses occurred at a faster rate than expected. These blunders have caused the bank to face a 46% drop in profits, according to analysts' estimates.
Companies fail to meet targets
The group's last major layoff came after the collapse of Lehman Brothers in 2008. Goldman made a plan to eliminate more than 3,000 jobs, nearly 10% of its workforce at the time, and top executives opted to forgo their bonuses. Bloomberg noted:
The latest cuts represent an acknowledgment that even businesses that outperformed this year will have to take the pain as well for a firm-wide performance that’s going to miss targets set for shareholders in a year of expense bleed.
People connected with the firm, who asked not to be identified, said the group will disclose the loss of $2 billion of capital tied to a new unit called Platform Solutions that is the foundation of its credit card and installment lending business.