Goldman Sachs is preparing for “a tougher environment” by laying off more employees, which may help it surpass a $600mn savings target from job cuts, one of the bank’s top executives said on Thursday.
The warning from Goldman president John Waldron underscores the increasingly gloomy outlook on Wall Street as rising interest rates have damped merger activity and the market for initial public offerings, while a recent trading boom has also fizzled.
“Activity levels are definitely more muted. That’s kind of what we expected. We are now embarking upon additional targeted actions with our headcount,” Waldron told investors at an industry conference organised by AllianceBernstein. “We’re running the firm tighter and we’re preparing for a tougher environment.”
The Financial Times and others reported on Tuesday that Goldman was weighing cuts of fewer than 250 jobs across the bank, primarily at the managing director level, and may then look to do another round of performance-based reductions in September. Other banks, including Morgan Stanley and Lazard, have also announced significant job losses.
With revenue under pressure, Waldron said Goldman was on track to hit and may even exceed a $600mn payroll savings target the bank had set in February.
Goldman’s investment banking business, which had two stellar years in 2020 and 2021, has struggled more recently. The unit’s revenue in the first three months of 2023 fell 26 per cent from a year earlier.
Waldron said the bank’s earnings from equities and fixed-income trading were tracking “down a little over 25 per cent” in the second quarter from a year earlier, when Goldman’s commodities business benefited from volatile energy markets after Russia’s full-scale invasion of Ukraine and central banks started to raise interest rates.
Waldron observed “a pretty risk off-tone” from institutional investors heading into the US debt ceiling deliberations, which are nearing a conclusion, while company chief executives are also “pretty cautious”.
“They’ve been probably pleasantly surprised with the resilience of the demand function, particularly on the consumer side. But generally speaking, pretty cautious in their forward planning.”
Goldman’s main growth strategy is centred on its newly combined asset and wealth management division, which chief executive David Solomon hopes will eventually yield more stable revenues that investors prize.
“To me, the asset and wealth management transition, the business transformation that’s going on in there, is a significant value to unlock opportunity for the firm,” Waldron said.