People walk near the New York Stock Exchange on May 12, 2022 in New York City.
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Goldman Sachs has slowed lending and is looking to reduce the fees it pays brokers as the investment bank braces for tough times ahead.
But New York-based Goldman has another weapon in its arsenal to stay afloat: A return that could reduce activity by the end of the year, according to a person familiar with the situation.
Wall Street firms have long shed perceived underperformers, often at the end of the year when companies plan to hand out bonuses to those who remain. These annual deals were put on hold during the pandemic as banks aggressively hired to take advantage of the boom.
For example, at Goldman, the number of people increased by 15% to 47,000 employees last year alone, according to the figures disclosed on Monday. Some of these employees may have been promoted through procurement, but this is a significant increase.
Now, in the midst of a sharp decline in the amount of money associated with debt and equity issuance, the leading Wall Street bank is considering returning to the end-of-the-year tradition.
Employees are often the single biggest factor when it comes to investment banking. At Goldman, the firm set aside $7.78 billion to pay compensation and benefits to employees through June 30, or about half of the total spending during that period.
CFO Denis Coleman told analysts Monday on a conference call to review second-quarter earnings that the company will delay hiring to replace those who have left and will “probably” resume the annual review at the end of the year.
This is “something we put off for a long time during the pandemic,” he said.
There is no target for headcount reduction, according to the man, and his plans are dynamic and subject to change. In the past, managing directors and partners have been asked to come up with a list of who to release if needed.