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Goldman Sachs makes 'brutal' job cuts in pursuit of lower costs

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Goldman Sachs on Wednesday laid off bankers at its offices in cities from New York and London to Hong Kong, laying off many staff without paying a bonus for work done last year, while giving some junior bankers 30 minutes to gather their belongings and leave.

The layoffs are the most concrete example of deep cost-cutting at the Wall Street bank as Chief Executive David Solomon tries to cut expenses after several years of boom and bust in his investment banking business.

Goldman embarked on the process of cutting 3,200 jobs last week, but a significant proportion of affected bankers received orders on Wednesday. The headcount reductions are equivalent to about 6.5 percent of the bank’s approximately 49,000 employees.

Managers tasked with breaking the bad news to employees described the process as “brutal” and morale as “horrendous” as thousands of employees showed up for work unaware of their fate.

Some Goldman employees who were laid off were given about half an hour to collect their coats and set up their desks before their building access cards were deactivated, people briefed on the process said.

In London, some affected bankers fled to the Harrild & Sons pub near the bank’s Plumtree Court offices, where they sympathized with coworkers-turned-ex-colleagues.

The rewards offered to departing employees differed considerably, according to people briefed on the deals, although many bankers were fired without receiving a bonus for work done in 2022.

Many managing directors — the second-most senior rank behind partner status — will be paid through the end of January and then given three months of paid gardening leave, the people said.

However, the most junior employees — those at or below the vice president level — received two months of severance, the people added.

In a statement on Wednesday, Goldman said it was a “difficult time for people to leave the company”.

“We are grateful for all of our people’s contributions and are providing support to ease their transitions. Our focus now is to adequately scale the company for the opportunities that lie ahead in a challenging macroeconomic environment,” said the bank.

New York-based Goldman must adhere to local requirements on how much notice it needs to provide in the jurisdictions in which it operates.

The layoffs come after Goldman’s headcount has grown by nearly 30% since the end of 2019, an expansion that reflected a surge in investment banking activity and a pandemic hiatus to the annual ritual culling of bankers.

The bank is grappling with the prospect of a US recession and a sharp drop in investment banking activity. Solomon is also trimming Goldman’s loss-making consumer bank ambitions after investor unease over spending in the division.

More bankers are expected to leave the group in the coming weeks after managers release the size of year-end bonuses for 2022. Investment bankers brace for a 40% reduction, while traders should expect fixed bonuses or lower, even after a strong performance last year due to volatility in financial markets.

Some Goldman employees are predicting that the disappointing bonus round will trigger a wave of layoffs, helping the bank cut costs without having to pay severance pay, but also raising the prospect of the company losing some of its top performers.

Banks often give employees a small bonus or none at all to send the message that it’s time to start looking for a new job.

In a sign of broader concerns on Wall Street about the trajectory of the US economy, BlackRock also plans to cut 500 employees from its global workforce, the Financial Times reported on Wednesday.