In the biggest wave of layoffs since the financial crisis, Goldman Sachs is cutting 6.5 percent of its jobs worldwide. Its Swiss subsidiary may be less affected.
Packing their bags and rushing out of the office is the current feeling for Goldman Sachs employees who have to leave the bank due to job cuts. Last week, the Wall Street firm announced it would cut up to 3,200 jobs. Now the first people affected received the bad news Wednesday from New York to London to Hong Kong and escorted shipped out.
The dismissals will result in the jobs of about 6.5 percent of the 49,000 employees being eliminated. After the collapse of Lehman Brothers in 2008, Goldman cut about 10 percent of its workforce.
30 Minutes and Out
According to a «Financial Times» report (behind paywall), some fired employees were given a mere half hour to gather their belongings before their building access cards were deactivated.
Many employees were terminated without getting a bonus for work done in the past year. In cases where severance packages were given, they differed significantly, according to the «FT».
A Short Postponement
Many managing directors, the second-highest rank after partner, will be paid through the end of January and then given three months of paid leave, the report said, citing people familiar with the process. Younger employees at or below the vice-president level, are only being offered two months' severance pay.
A year ago, the world looked very different. Employees of the Wall Street heavyweight were showered with lavish bonus increases. CEO David Solomon was the highest-paid CEO of a major US bank, with $35 million in compensation for 2021, alongside Morgan Stanley's James Gorman.
Swiss Banks in the Firing Line?
The restructuring has been announced across the firm and affects all business units, including investment banking, asset management, global markets, and wealth management. But its Swiss operation is one of the most important locations for wealth management within Goldman Sachs and may be somewhat less affected because of that particular focus.
Various reports estimate about one-third of the job cuts will come in core areas of trading and banking. The Swiss unit is located in the world's largest offshore banking center and is planning a move to Zurich's Bahnhofstrasse, and likely to be less exposed.
Any layoffs still to be announced will be less dramatic and more orderly at Goldman's Swiss subsidiary than elsewhere because of the protection against dismissal in Swiss labor law.
Investment Banking Slump
The global layoffs come after Goldman's headcount grew nearly 30 percent since the end of 2019, driven largely by the burgeoning investment banking business. But the unusually large round of layoffs is said to be because, during the Corona pandemic, underperforming bankers were screened out less than in previous years.
Solomon is also working to reduce Goldman's loss-making ambitions in the consumer business after investors criticized spending in the sector.
More bankers are expected to leave the group in the coming weeks after managers announced the size of year-end bonuses for 2022. According to the report, investment bankers could see their bonuses cut by 40 percent. Traders can expect their bonuses to remain the same or lower due to the financial market slump.
Wall Street Earthquake
The layoffs at Goldman Sachs are the most striking example of the deep cost-cutting measures being taken by Wall Street banks. Morgan Stanley, Wells Fargo, Barclays, Credit Suisse, and Black Rock, among others, have either already laid off employees or announced job cuts. Some smaller companies have had several rounds of layoffs.
That jobs would need to be cut became apparent when revenues at the five largest US banks from closing deals and selling new securities plunged by nearly half in the first nine months of last year. The upcoming quarterly reporting season of Wall Street banks does not bode well for improvement.
Goldman reports its fourth-quarter results on Jan. 17.
