The boss of Goldman Sachs has told staff he will cut jobs early next month as the U.S. investment bank looks to improve earnings amid worries about the global economy.
The bank is reportedly considering cutting about 8% of its 49,000 employees, which could amount to as many as 4,000 job losses. People also think about it bonus pool cuts of up to 40%.
It comes as the City of London prepares for a thinning of its ranks, with thousands of jobs expected to disappear. After a peak year in 2022, teams working on M&A are at extra risk over the next 12 months as interest rates rise, increasing the cost of borrowing the money needed to fund new deals.
Goldman CEO David Solomon said the partnership was bracing for slower economic growth as central banks raise interest rates. Bloomberg News.
Solomon said: “We are conducting a careful review and while discussions are ongoing, we expect our headcount reduction to take place in the first half of January.”
Investment banks experienced a boom in 2021, when companies experienced a huge wave of mergers and acquisitions after the coronavirus pandemic. Goldman Sachs and other banks expanded to take advantage, but the number of lucrative deals fell in 2022 due to rising interest rates around the world.
“There are several factors impacting the business landscape, including tightening monetary conditions slowing economic activity,” Solomon said in the post. “For our leadership team, the focus is on preparing the company to weather these headwinds.”
Goldman is still expected to report big gains for this year and next. Analysts polled by S&P Global Market Intelligence predict it will make $12bn (£10bn) in net profit for 2022 and $13bn in 2023.
That would be more than any other year since the global financial crisis in 2009, not counting the record profit of $21 billion in 2021. However, the bank is under pressure to improve its stock market valuation, which is lower compared to some U.S. investment bank rivals. . like Morgan Stanley. The share price is down 14% in 2022.
If the job cuts are completed in the first two weeks of January, Goldman executives can present them to investors on January 17, when the bank will report its full-year 2022 results. So Solomon will speak to investors in February about a restructuring plan he announced in October to try to improve profitability.
That plan — the second major reorganization during Solomon’s four-year reign as CEO — involves merging two wealth and asset management divisions he had previously separated in 2019, and withdrawing from his efforts to further expand into consumer banking under the Marcus brand.
The bank’s investment strategists have predicted 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 spike and the worst expected recessions in economies around the world pass, they said.
Goldman Sachs declined to comment.