By Saeed Azhar and Lananh Nguyen
NEW YORK (Reuters) - Goldman Sachs Group Inc (NYSE:GS) is planning to cut thousands of employees to navigate a difficult economic environment, a source familiar with the matter said.
The layoffs are the latest sign that cuts are accelerating across Wall Street as dealmaking dries up. Investment banking revenues have plunged this year amid a slowdown in mergers and share offerings, marking a stark reversal from a blockbuster 2021 when bankers received big pay bumps.
Goldman Sachs had 49,100 employees at the end of the third quarter after adding significant numbers of staff during the pandemic. Its headcount will remain above pre-pandemic levels, the source said. The workforce stood at 38,300 at the end of 2019, according to a filing.
The number of employees that will be affected by the layoffs is still being discussed, and details are expected to be finalized early next year, the source said.
The bank is weighing a sharp cut to the annual bonus pool this year, a separate source familiar with the matter said. That contrasts with increases of 40% to 50% for top-performing investment bankers in 2021, Reuters reported in January, citing people with direct knowledge of the matter.
"GS needs to show that its costs are as variable as its revenues, especially after a year when it provided special rewards to top managers during the boom times," wrote Mike Mayo, a banking analyst at Wells Fargo (NYSE:WFC).
"Goldman Sachs now needs to show that it can do the same when business is not as good and that they live up to the old Wall St. adage that they 'eat what they kill,'" he said in a note.
The company's stock fell 1.3% in afternoon trading alongside shares of JPMorgan (NYSE:JPM) & Chase Co and Morgan Stanley (NYSE:MS), which fell 0.6% and 1.3%, respectively.
Goldman shares have slumped almost 10% this year. But they have outperformed the broader S&P 500 bank index, which is down 24% year to date.
CONSUMER BANK STRUGGLES
The latest plan would include hundreds of employees being cut from Goldman's consumer business, a source said.
The bank signaled it was scaling back its ambitions for Marcus, the loss-making consumer unit, in October. Goldman also plans to stop originating unsecured consumer loans, a source familiar with the move told Reuters earlier this week, another sign it is stepping back from the business.
Chief Executive Officer David Solomon, who took the helm in 2018, has tried to diversify the company's operations with Marcus. It was placed under the wealth business in October as part of a management reshuffle that also merged the trading and investment banking units.
Trading and investment banking -- the traditional drivers of Goldman's profit -- accounted for nearly 65% of its revenue at the end of the third quarter, compared with 59% in the third quarter of 2018, when Solomon took the top job.
Semafor earlier on Friday reported that Goldman will lay off as many as 4,000 people as the bank struggles to meet profit targets, citing people familiar with the matter.
Goldman Sachs declined to comment.
The latest plans come after Goldman cut about 500 employees in September, after pausing the annual practice for two years during the pandemic, a source familiar with the matter told Reuters at the time.
The investment bank had first warned in July that it might slow hiring and reduce expenses.
Global banks, including Morgan Stanley and Citigroup Inc (NYSE:C), have reduced their workforces in recent months as a dealmaking boom on Wall Street fizzled out due to high interest rates, tensions between the United States and China, the war between Russia and Ukraine, and soaring inflation.