Goldman CEO Solomon Says Staff Cuts Are Coming in January (From Bloomberg) [3 Articles]
~ Friday, December 30, 2022 Blog Post ~
~ Updated on Thursday, January 12, 2023 ~
Goldman Sachs Group Inc. is working on a fresh round of job cuts that will be unveiled in a matter of weeks, Chief Executive Officer David Solomon said in his traditional year-end message to staff.
“We are conducting a careful review and while discussions are still ongoing, we anticipate our headcount reduction will take place in the first half of January,” Solomon said. “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.”
The firm may seek to eliminate as much as 8% of its workforce, or up to 4,000 jobs, to contain a slump in profit and revenue, people with knowledge of the matter said earlier this month, although the final number could come in lower. Top managers have been asked to identify potential cost-reduction targets, and no final job-cut number has been determined, the people said, asking not to be identified discussing internal deliberations.
A spokesperson for the New York-based company declined to comment.
“We need to proceed with caution and manage our resources wisely,” Solomon said in his message.
With investment-banking revenue plummeting and a recession looming, Wall Street is in retrenchment mode. The job cuts and hiring freezes that struck the tech world have made their way to the finance industry, with banking executives preparing for what’s expected to be an austere year ahead.
Morgan Stanley, Credit Suisse Group AG and Barclays Plc have all either already fired staff or announced that they plan to do so in coming months, and some smaller firms have even completed multiple rounds of terminations.
Goldman is on track to post about $48 billion in annual revenue, its second-best performance, behind only last year’s record. An expensive foray into consumer banking followed by a subsequent retreat, along with spending on technology and integrating operations, have contributed to the cost bleed this year.
The proposed cuts would mark a sharper pullback than plans disclosed by any of Goldman’s rivals as management struggles to achieve profitability targets. Analysts predict the Wall Street giant’s adjusted annual profit could fall 44%.
Goldman executives have pointed out that the bank’s workforce has ballooned 34% since the end of 2018 to more than 49,000 as of this year’s third quarter.
(Adds past finance-industry job cuts in sixth, seventh paragraphs.)
©2022 Bloomberg L.P.
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Article 2:
Bloomberg Wealth: Happy Holidays, Now You’re Fired
By Charlie Wells, December 8, 2022
Layoffs are picking up, just in time for the holidays.
At first it was the job-slashing in tech that gobbled up all the attention. From Twitter to Amazon, tech firms have cut more than 146,000 jobs in 2022 after years of seemingly unlimited hiring, according to tracker Layoffs.fyi. Yet with each passing day, the unemployment gloom spreads. It’s reached Wall Street, real estate, crypto, and even the food and beverage industry.
At first glance, the cuts feel out of step with the broader US labor market. Data last week showed a still-tight employment picture, with firms adding 263,000 jobs last month, well above the 200,000 median estimate in a Bloomberg survey of economists. But dig deeper, and you’ll see those gains were uneven across industries. Much of the hiring in November was concentrated in leisure and hospitality, a sector still doing a lot of “catch-up” hiring after the pandemic. Other sectors self-admittedly “over-hired” during the pandemic and are now facing cost pressures.
Even those employees lucky enough to keep their jobs face a glum outlook on discretionary pay. Big banks, for instance, are considering cutting bonuses for some staff by as much as 30%. If that weren’t enough, bonus snubs are often seen as a precursor to firing.
Unsettling? You bet. To deal with all this job uncertainty in the air, I emailed a few financial advisers to see what they suggested for people who have been — or believe they may soon be — laid off. I also asked them how people should prepare for a potentially smaller bonus. Here is what they told me:
Liquidity, liquidity, liquidity
Dennis Nolte, financial consultant with Seacoast Investment Services in Winter Park, Florida
What to do about a looming or recent layoff? Stop contributing to any retirement funds unless you are putting in only what the company matches. You need to build cash. Make sure you have liquidity, even considering a loan against your company retirement plan if you’re not 55 yet. You can’t borrow against an inactive 401(k).
And a diminished bonus? Spend less on your holidays, put off buying that new car or front-loading that cruise. And make sure you have liquidity like a HELOC.
Master your severance
Michael Wren, CEO of Legacy Financial Strategies in Leawood, Kansas
What to do about a looming or recent layoff? If you’ve been laid off and are receiving a severance package, be sure to check your state laws. Many companies will offer you the option of a lump sum or weekly severance over a period of time. The option you select may have a huge impact on the unemployment benefit you’ll be eligible for.
And a diminished bonus? If you’re expecting a much smaller bonus or none at all, consider whether you’ll be in a lower tax bracket than the previous year. Roth conversions, Roth eligibility, and other tax-related goodies may suddenly be in reach whereas in previous years they were disallowed. Remember to always invest or defer your bonus, where possible, into your 401(k) or someplace other than your checking account. That way a skipped or lower-than-normal bonus year won’t impact your spending and cash-flow management.
Dodge the wrong next job
Brian Schmehil, managing director of wealth management for the Mather Group, Chicago
What to do about a looming or recent layoff? Make sure you have six to 12 months worth of expenses in cash to give you time to look for the right job. The worst thing you can do for your career is be forced to take a job you may not want or that underpays because you do not have enough money to cover your expenses while job searching.
And a diminished bonus? You should never rely on a discretionary bonus when budgeting. That bonus, if paid, should have been going towards discretionary spending or savings. If you rely on it to get by, you will need to reduce spending or your savings rate to make up for the loss.
Some food for thought. Good luck and email me if you have any questions. Each week I get financial questions answered by advisers from across the country, and am happy to try to help with yours. — Charlie Wells
Send us questions about your own financial dilemmas to bbgwealth@bloomberg.net or fill out this form.
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Opinion
In Bloomberg Opinion this week, Alexis Leondis and Leticia Miranda say consumers should think carefully before using buy-now, pay-later services this holiday season:
The deal might be good for retailers but could backfire for consumers. There’s no real regulation around what BNPL lenders have to tell agencies that calculate credit scores. So punctual payments usually don’t boost the score. Some providers, however, still report late payments, which could harm a person’s ability to be approved for a mortgage or auto loan down the road. Among borrowers who had at least one late payment, 15% said the information was reflected on their credit report, according to a recent survey by Consumer Reports.
Read their full argument here.
Financial FAQ
What is the biggest mistake you see investors making in today’s market?
The biggest mistake you can make right now is waiting for the “right time” to invest. If you stop investing because you’re worried about volatility or a recession, you can end up holding too much cash.
And if you’re waiting in hopes of buying an upcoming dip, you run the risk that the market will go up while you’re sitting on the sidelines. If you try to time the market, you’re likely to stay out of the market too long and miss out. This can really hurt you in the long-term, especially when it comes to keeping up with inflation.
One other thing to call out is that despite rising interest rates, many banks are not increasing rates on savings accounts — despite continuing to raise mortgage and loan rates. There are now cash accounts offering a 3% APY or higher. If you’re not taking advantage of these higher APYs, you’re missing out on free money. — Tony Molina, CPA and product evangelist at Wealthfront
Send us questions about your own financial dilemmas to bbgwealth@bloomberg.net or fill out this form.
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Article 3:
Goldman Sachs makes ‘brutal’ job cuts in quest for lower costs
Group pays some bankers no bonus for last year’s work while giving others 30 minutes to leave
By Joshua Franklin and Ortenca Aliaj in New York, Stephen Morris in London, January 11, 2023
Goldman Sachs on Wednesday sacked bankers at its offices in cities from New York and London to Hong Kong, dismissing many employees without paying a bonus for work performed last year while giving some junior bankers 30 minutes to gather their belongings and leave.
The layoffs are the most concrete example of a deep cost-cutting drive at the Wall Street bank, as chief executive David Solomon tries to reduce expenses following several years of expansion and a slowdown in its investment banking business.
Goldman embarked on the process of cutting 3,200 jobs last week but a significant proportion of affected bankers were given their marching orders on Wednesday. The headcount reductions are equivalent to about 6.5 per cent of the bank’s roughly 49,000 employees.
Managers tasked with giving staff the bad news described the process as “brutal” and morale as “horrendous” as thousands of employees turned up to work unaware of their fates.
Some Goldman employees that were let go were given about half an hour to collect their coats and pack up their desks before their building access cards were deactivated, said people briefed on the process.
In London, some affected bankers decamped to the Harrild & Sons pub near the bank’s Plumtree Court offices, where they commiserated with co-workers turned ex-colleagues.
The pay-offs on offer to departing staff differed markedly, according to people briefed on the arrangements, although many bankers were let go without being paid a bonus for work they performed in 2022.
Many managing directors — the second most senior rank behind partner status — will be paid until the end of January and then given three months of paid gardening leave, the people said.
However, more junior employees — those at or below the vice-president level — were offered two months of severance pay, the people added.
In a statement on Wednesday, Goldman said it was a “difficult time for people leaving the firm”.
“We’re grateful for all our people’s contributions, and we’re providing support to ease their transitions. Our focus now is to appropriately size the firm for the opportunities ahead of us in a challenging macroeconomic environment,” the bank said.
New York-based Goldman must adhere to local requirements over how much notice it it is required to give in the jurisdictions in which it operates.
The dismissals come after the number of Goldman employees grew by almost 30 per cent since the end of 2019, an expansion that reflected a rush of investment banking activity and a pandemic hiatus for the ritual cull of bankers that had taken place annually.
The bank is grappling with the prospect of a recession in the US and a sharp drop-off in investment banking activity. Solomon is also paring back Goldman’s lossmaking consumer banking ambitions following investor unease about spending at the division.
More bankers are expected to depart the group over the coming weeks after managers disclose the size of year-end bonuses for 2022. Investment bankers are braced for reduction of 40 per cent while traders have been told to expect flat or lower bonuses even after a strong performance last year owing to volatile financial markets.
Some Goldman employees are predicting that the disappointing bonus round will prompt a wave of resignations, helping the bank reduce costs without having to pay severance but also raising the prospect of the firm losing some of its top performers.
Banks often give employees a small bonus or none at all to send the message that it is time to start looking for a new job.
In a sign of broader worries on Wall Street about the trajectory for the US economy, BlackRock is also planning to cut 500 employees from its global workforce, the FT reported earlier on Wednesday.
Sources:
https://www.bnnbloomberg.ca/goldman-ceo-solomon-says-staff-cuts-are-coming-in-january-1.1864006
https://www.ft.com/content/df3ec355-4221-468d-980c-63f170382d17
https://twitter.com/ftfinancenews/status/1613292832961318945
