COMP NEWS – Investment bank Goldman Sachs is planning to lay off thousands of employees and curtail annual bonuses, sources say.

Goldman Sachs Group Inc.is planning to lay off several thousand employees, according to people familiar with the matter, another consequence of this year’s deal-making slump.

A person familiar with the situation said the bank will be leaner in 2023, but it will still have more employees than it did before the pandemic. Goldman had some 49,000 employees as of September, up from about 38,000 at the end of 2019.

Goldman also expects to slash, and in some cases eliminate, the annual bonuses of underperforming employees, people familiar with the matter said.

After a hiring boom in the midst of the pandemic, Goldman Sachs is looking to trim its employee count in order to run a leaner company. Part of that process will include eliminating or cutting down bonuses, which are traditionally a large part of employees’ compensation in the company.

Like other Wall Street banks, Goldman hired aggressively throughout 2020 and 2021, bringing in new employees to help it keep up with an M&A boom. This year was a different story: An economic slowdown, war in Europe and rising interest rates triggered a bear market for stocks and a slump in deal making. Morgan Stanley also laid off workers this month, and similar cutbacks have swept through American companies.

Some of the job cuts at Goldman will be part of annual workforce reviews. In most years, Goldman eliminates underperformers during that process, but layoffs were suspended during the pandemic.

Taking away bonuses is another lever that Goldman can pull to trim expenses. Like most Wall Street employees, Goldman staff received a large portion of their compensation in annual payouts tied to their performance and that of the overall firm.

Employees who get no bonus usually interpret it as an invitation to leave. Eliminating bonuses for highly paid partners and other executives can also give the bank leeway to preserve compensation for junior bankers.

The layoffs and trimmed bonuses could hit investment bankers as well as employees.

Investment bankers covering tech, including some managing directors, could be hit hard by layoffs, according to people familiar with the matter. The tech industry in particular fueled the pandemic stock run-up, and shares of tech companies are down drastically this year.

But if overhiring and overpaying staff during good times has been a standing tradition on Wall Street, then so have steep job and bonus cuts during lean yeaRS.

In 2020, the panic that gripped the markets early in the year as the coronavirus pandemic circled the globe quickly gave way a massive rally. The stock market routinely touched new highs and corporate deal making brought in blockbuster fees.

And the Wall Street firms, in turn, went on a hiring spree, often offering big bucks to lure new employees and keep current staff from jumping ship.

The party came to a halt this year. With uncertain markets and a recession potentially on the horizon, corporate clients went jittery. Wall Street firms have been forced to confront a steep slowdown in many of their businesses.

To read more about Goldman Sachs’ layoffs and bonus reduction plans, click here.

For more Comp News, see our recent posts.