Goldman Sachs is preparing to lay off nearly 4,000 employees

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Goldman Sachs is preparing to lay off as many as 3,900 employees starting in January as CEO David Solomon seeks to boost the bank’s profitability amid economic headwinds.

Plans are still in the works, and the current target for culling “up to 8 percent” of the global workforce of 49,000 could potentially be scaled back if the business outlook improves, according to three people familiar with the discussions.

Wall Street faces a sharp decline in deal-making and capital markets activity after a bumper 2021 that resulted in a surge in hiring and big bonuses. Investment banking fees are down 35 percent in the year to date, according to Refinitiv data.

Goldman is under particular pressure to improve margins because Solomon is trying to improve the bank’s stock market valuation, which has lagged behind peers like Morgan Stanley for years.

The bank announced an overhaul in October that included merging its investment banking division and trading division, as well as rolling back its retail banking services in the wake of investor criticism of its losses and mounting costs.

Cutting expenses is imperative for the bank after net profit fell 44 percent in the first nine months of the year, causing it to miss its 14 percent return on tangible equity target, a measure of profitability.

Shares have fallen about 10 percent this year.

Discussions of job cuts go well beyond the bank’s recent annual cull of the worst performers, which was paused for two years during the pandemic. It was first reported by Semaphore.

Goldman declined to comment, but Solomon pointed to the upcoming cuts at the bank’s financial services conference last week.

“We continue to see headwinds on our expense lines, particularly in the near term,” he said. “We have embarked on certain plans to mitigate costs, but it will take time to realize the benefits. Ultimately, we will remain smart and size the company to reflect the range of opportunities.”

One person familiar with the plans said the cuts would be distributed across different departments rather than concentrated in one unit or country. Managers are required to decide which employees will be laid off before the end of the year.

The bank has been in a hiring period, with staff at the bank jumping to 49,100 this year from 38,300 at the end of 2019.

The ax could be even harder on the consumer business, as at least 400 jobs could be cut.

The push into mass-market retail banking, a key shift for Wall Street’s best-known trading and advisory firm, has been a central plank of Solomon’s strategy to diversify earnings and make Goldman less dependent on the volatile earnings of its investment bank.

However, investor opposition to the high-priced consumer movement forced Solomon to apologize and reverse course two months earlier, leaving the long-term future of the division concerned.

Suleiman’s diversification efforts will now focus on asset and wealth management and transaction banking.

Goldman Sachs also plans to cut costs by cutting wages. Earlier this week, the Financial Times reported that the bank was preparing to cut the bonus pool of its 3,000 investment bankers, by 40 percent or more, the biggest drop since the 2008 financial crisis.

Annual payments to Goldman’s roughly 400 partners could fall, with some facing a 50 percent drop as the bank prioritizes entry-level employees.

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