Shares of Goldman Sachs (NYSE:GS) closed in the red after it was reported the investment bank plans to lay off 8% of its staff starting in January. This follows a layoff announcement in September that revived the company’s tradition of cutting 1% to 5% of lower performing workers. As of then, Goldman employed about 49,000 workers, up 14% year-over-year and an increase from roughly 38,000 workers as of the end of 2019. Furthermore, layoffs were suspended during the coronavirus pandemic.
“We continue to see headwinds on our expense lines, particularly in the near term,” explained CEO David Solomon at a conference last week. “We’ve set in motion certain expense mitigation plans, but it will take some time to realize the benefits. Ultimately, we will remain nimble and we will size the firm to reflect the opportunity set.”
On top of the layoffs, the bank plans on cutting or completely eliminating the annual bonuses of lower performing employees. Goldman had aggressively hired employees in 2020 and 2021 as the market rose higher and several special purpose acquisition companies (SPACs) were introduced. With the S&P 500 declining 20% this year, the rosy days of the post-coronavirus pandemic are long gone.
GS Stock: What to Know About Goldman Sachs Layoffs
With less corporate deals and SPACs becoming public, business has slowed down drastically. Furthermore, the Wall Street Journal reports that Goldman is “more sensitive to the ebb and flow of the capital markets than many of its peers.” That’s because the company derives much of its business from investment banking and trading. Still, other investment banks are feeling the pain as well.
Morgan Stanley (NYSE:MS) announced earlier this month it would cut about 1,600 jobs, which represents about 2% of its global workforce. The last time the company initiated global layoffs was in 2019. Additionally, the layoffs follow the acquisition of brokerage E*Trade and investment firm Eaton Vance, which added about 20,000 new employees.
CNBC notes 8% of Goldman’s staff is equivalent to about 4,000 workers. The layoffs would be the largest among Wall Street firms this year.
Meanwhile, analysts are still bullish on GS stock. GS carries an average price target of $392.64 among 25 analysts with coverage of the stock. That would imply upside of about 13% from current prices.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
