The news: Goldman Sachs will reportedly begin cutting about 3,200 staff this week, embarking on extensive cost-cutting in response to disappointing results from multiple business areas amid continued market uncertainty.
More than a third of layoffs will likely be from Goldman’s core trading and banking units, according to Bloomberg, which cited a person with knowledge of the matter.
What’s behind mass layoffs? Three main factors are behind one of the biggest rounds of redundancies ever for the Wall Street giant.
- Market slowdown. Goldman’s investment banking revenues have suffered alongside its rivals due to quieter M&A and IPO markets. As a relatively gloomy economic outlook shows few signs of improving, this looks set to continue and impact other business lines.
- Overgrown cost base. Goldman’s expensive and largely unsuccessful venture into consumer banking led to losses of $1.2 billion last year for Marcus. Growing pressure to cut costs helped force the bank to reorganize the unit. The lender also overstretched in growing headcount: It’s expanded its workforce at roughly double the speed of rivals since the beginning of 2020 and dropped annual layoffs tied to underperformance, per Bloomberg.
- Profit squeeze. In upcoming earnings results, the bank is reportedly set to reveal more than $2 billion in pretax losses for its new credit card and installment-lending business, according to Bloomberg. That, combined with mounting costs and tough market conditions, have impacted Goldman’s bottom line: Analysts expect an estimated 46% decrease in profits.