But New York-based Goldman has another tool in its arsenal to keep expenses under control: A potential return of year-end job cuts, according to a person with knowledge of the situation.
Wall Street firms have long culled those deemed to be underperformers, often at the end of the year as the companies prepare to dole out bonuses to those who remain. That annual exercise was paused during the pandemic as banks furiously hired to take advantage of a record boom in deals activity.
At Goldman, for instance, head count swelled by 15% to 47,000 employees in the past year alone, according to figures disclosed Monday. Some of those workers may have come aboard via acquisition, but that is still a large increase.
Now, amid a steep decline in revenue tied to debt and equity issuance, Wall Street’s leading investment bank is considering a return to the year-end ritual.
Employees often make up the single biggest line item when it comes to expenses at an investment bank. At Goldman, the firm set aside $7.78 billion for workers’ compensation and benefits through June 30, or half the overall operating expenses of the period.
CFO Denis Coleman told analysts Monday on a conference call to review second-quarter earnings that the firm will slow hiring to replace those who leave and will “probably” reinstate annual performance reviews by year end.
That is “something that we suspended during the period of the pandemic for the most part,” he said.
No target exists yet for head count reduction, according to the person, and the plans are dynamic and could change. In the past, managing directors and partners were asked to come up with lists of those they could release if needed.
CEO David Solomon touched on the topic earlier Monday in an interview with CNBC’s Jim Cramer.
“We’re always looking to add to talent to the firm,” Solomon said. “But at the same point, we’re going to manage the growth of that going forward a little bit more cautiously given the macro environment.”