Goldman Sachs (NYSE:GS) is preparing to implement a new round of employment reductions, primarily targeting underperformers within the company, according to insiders. This anticipated move is part of an annual procedure that typically results in a 1% to 5% reduction in the firm's total workforce. For this round, Goldman Sachs is expected to lean toward the lower end of this range, particularly within its core sectors like investment banking and trading. The commencement of these layoffs could begin as early as the latter part of October.
The proposed 1% decrease in the workforce will affect various departments, including asset management, wealth management, and operational roles, translating to approximately 440 positions. The final figures are yet to be solidified as potential resignations prior to the official announcement could lower the total number of terminations.
Goldman Sachs resumed its "strategic resource allocation" last year after pausing during the peak of the COVID-19 crisis. The previous round of layoffs skewed towards the lower spectrum. The bank has already made substantial reductions this year with a decrease of about 3,200 positions in January, equivalent to 6.5% of the workforce. This decision was driven by a need to minimize expenditures following significant drops in investment banking and deficits in its consumer banking sector.
The bank's compensation saw a downturn in 2022, which has strained employee morale along with recent layoffs and trimmed bonuses. CEO David Solomon acknowledged that the significant reduction in compensation in 2022 was a factor in the bank's current sentiment. In response to media scrutiny on his leadership, Solomon stated in a CNBC interview, “The portrayal that has been presented doesn't resonate with my self-view.”
Goldman's first-half profits for 2023 saw a 35% dip, setting the tone for another potential year of subdued compensation. However, senior bank officials are reportedly discussing potentially awarding a larger slice of the profit pie to their staff this year. Concrete compensation strategies are slated for determination later in the year.
As Goldman Sachs recalibrates its focus from consumer banking due to sustained losses, it's steering toward burgeoning sectors like asset and wealth management. However, industry observers believe that these areas are unlikely to match the profitability and revenue contribution of their investment banking and trading divisions.
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