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Goldman Sachs could cut up to eight percent of its staff, or around 4,000 jobs, according to reports Friday, as the financial giant eyes sluggish global growth in 2023. online news
The job cuts are expected early in 2023, according to reports in Semafor and CNBC that said the final figure could ultimately be smaller than eight percent.
Goldman Sachs typically trims about one to five percent of headcount each year, targeting underperforming staff.
This year’s culling will be deeper than usual in light of the uncertain economic outlook and the growth in Goldman’s staffing in recent years, a person familiar with the matter told AFP.
Goldman’s staff stood at 49,100 at the end of October, up nearly 30 percent from the end of 2019 after hiring campaigns and acquisitions.
The move comes as Goldman Sachs and other investment banks have seen a big drop in fees tied to initial public offerings and described a cloudy outlook for merger and acquisition advising in 2023 due to economic uncertainty.
At a financial conference last week, Goldman Chief Executive David Solomon said capital markets activity had also been weaker than expected, with clients “taking risk down” after a volatile year.
“At the same time, we continue to see headwinds on our expense lines, especially in the near term,” Solomon said. “Ultimately, we will remain nimble and we will size the firm to reflect the opportunity set that we see in front of us.”
jmb/bgs
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Notes from APS Radio News
According to Wikipedia:
From 2004 to 2007, the top five U.S. investment banks each significantly increased their financial leverage, which increased their vulnerability to a financial shock. Changes in capital requirements, intended to keep U.S. banks competitive with their European counterparts, allowed lower risk weightings for AAA-rated securities. The shift from first-loss tranches to AAA-rated tranches was seen by regulators as a risk reduction that compensated the higher leverage. These five institutions reported over $4.1 trillion in debt for fiscal year 2007, about 30% of U.S. nominal GDP for 2007. Lehman Brothers went bankrupt and was liquidated, Bear Stearns and Merrill Lynch were sold at fire-sale prices, and Goldman Sachs and Morgan Stanley became commercial banks, subjecting themselves to more stringent regulation. With the exception of Lehman, these companies required or received government support.
Before the financial crsis of 2008 became fully-fledged, Goldman Sachs had been selling billions of dollars of mortgage-backed securities.
As well, it had obtained collateralized debt obligations from AIG, an insurance company.
Losses that resulted from the purchases of mortgage backed securities and the cdo’s eventually were subsidized by taxpayers.
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