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Goldman Sachs Prepares for Job Cuts Amidst Sluggish Deal Market

In response to a challenging deal market, Goldman Sachs is set to trim its workforce.

Goldman Sachs
Goldman Sachs

Goldman Sachs to Trim Under 250 Positions

Goldman Sachs Group Inc (NYSE: GS) has plans to reduce its workforce by less than 250 roles in the coming weeks. According to an informed source, this decision comes amidst a languishing deal market that is straining investment banking operations.

Sweeping Reductions Across All Levels of Seniority

The layoffs are predicted to be widespread, possibly affecting all levels of seniority, including partners and managing directors. The Wall Street Journal initially reported this development. As of the end of March, Goldman Sachs reported 45,400 employees.

Continued Downsizing Amidst Economic Challenges

This move is not the first of its kind for Goldman, which cut around 3,200 roles in the first quarter, marking its largest layoff round since the 2008 financial crisis. Furthermore, the firm trimmed around 500 positions last year. A second insider has suggested that the bank has maintained tight budget controls this year.

Effects of Rising Interest Rates and Global Conflict on Investment Banking

Investment banking has taken a considerable hit due to a decrease in dealmaking. This downturn is attributed to the Federal Reserve's aggressive interest rate hikes aimed at controlling inflation and geopolitical tensions related to the conflict in Ukraine. These factors have resulted in a smoother economic forecast.

Other Banks Also Grappling with Similar Challenges

Goldman's rivals are also experiencing similar challenges. Morgan Stanley (NYSE: MS) intends to cut about 3,000 jobs in the second quarter, marking its second layoff round within six months. Lazard (NYSE: LAZ) Ltd plans to cut its workforce by 10%.

Goldman Sachs' Strategy for Improved Efficiency

In late February, Goldman Sachs CFO Denis Coleman informed investors that the bank intends to enhance its efficiency ratio by reducing its workforce, not replacing departing employees, and cutting other expenses. This strategy includes a $600 million payroll reduction. Goldman aims to bring its medium-term efficiency ratio to 60% from 68.7% reported at the end of March. Banks consider a lower efficiency ratio as an indication of increased profitability.

Lowest Levels of Mergers, Acquisitions, and IPOs in Over a Decade

In Q1 2023, global mergers and acquisitions hit their lowest point in over ten years. Similarly, initial public offering volumes also experienced a significant drop, hitting their lowest since 2019.