Goldman Sachs Moves to Cut Jobs, Sells Private Jets "Desperate Cost-Cutting Measures"

[Asia Economy Reporter Yujin Cho] Goldman Sachs, a major U.S. investment bank (IB) that has embarked on the largest-ever round of layoffs, is set to sell its private jets. Goldman Sachs stated that this move is "to reduce costs." The company has launched a company-wide cost-cutting campaign covering everything from new investments to travel expenses and other ancillary costs. This is being seen as a return to an emergency management system similar to that during the 2008 financial crisis.

On the 10th (local time), major foreign media reported that Goldman Sachs has begun reviewing comprehensive cost-cutting measures, including selling private jets, following a 40% annual bonus cut. Goldman Sachs is considering selling both of its two private jets, which have been in operation since 2019, and switching to a leasing model.

On the 11th, Goldman Sachs is expected to officially announce layoffs targeting employees at its New York and London offices. The scale of layoffs will be 3,200 employees, the largest in the company's history. Goldman Sachs' total workforce has increased by more than 34% since 2018 to approximately 49,100 employees (as of the end of last September), and this layoff corresponds to about 6.5% of the total workforce. During the 2008 financial crisis triggered by the collapse of Lehman Brothers, Goldman Sachs laid off about 3,000 employees, roughly 10% of its workforce.

Goldman Sachs, representing Wall Street, has resorted to stringent cost-cutting measures due to a significant deterioration in profits in its core IB division amid recession concerns.

Foreign media reported that with high interest rates drying up cash in the market and the IB division's performance taking a direct hit, emergency measures are being implemented. The stock market and mergers and acquisitions (M&A) market, which enjoyed unprecedented booms during the COVID-19 pandemic, have fallen into a slump, and as corporate financing fee income has sharply declined, the entire Wall Street is being affected.

Unlike competitors such as Morgan Stanley and JP Morgan, which have diversified their businesses, Goldman Sachs, which relies heavily on the IB division for profits, has suffered a greater impact on its performance. Goldman Sachs' net income as of the end of Q3 last year decreased by 44% compared to the same period the previous year.

David Solomon, CEO, stated in a year-end message to employees on the 27th of last month, "There are many factors affecting the business environment, including monetary tightening policies that have slowed economic activity," adding, "Management is focusing on preparing for headwinds."

Following the Federal Reserve's (Fed) four consecutive 'giant steps' of raising the benchmark interest rate by 0.75 percentage points at a time, the pace was slowed to a 'big step' (0.50 percentage point increase) at the end of last year, but the upper limit of U.S. interest rates jumped to 4.5%, the highest level since 2008. Fed Chair Jerome Powell has signaled that while the pace of tightening will be moderated, interest rates will be maintained at higher levels for longer, leading to expectations of continued rate hikes this year.

On Wall Street, preparations for prolonged capital market stagnation due to high-intensity tightening and economic slowdown are accelerating downsizing. Following small-scale layoffs by Citigroup and Barclays, Morgan Stanley announced earlier this month plans to lay off 1,600 employees, equivalent to 2% of its total workforce.