A second wave of layoffs is sweeping through Wall Street in the United States. As the economic slowdown deepens the downturn in capital markets such as mergers and acquisitions (M&A) between companies and the impact on earnings grows, investment banks (IBs) are continuing their efforts to downsize.
According to major foreign media on the 30th (local time), Goldman Sachs, the largest IB in the U.S., is planning a workforce adjustment of about 250 employees. This comes just four months after the largest layoff in its history of 3,200 employees in January. With this round of layoffs, Goldman Sachs' global headcount is expected to decrease to 45,000.
Goldman Sachs also conducted layoffs of about 3,200 employees, approximately 6.5% of its total workforce, in January this year. This is larger than the 3,000 layoffs during the 2008 global financial crisis triggered by the Lehman Brothers bankruptcy, marking the largest scale in history.
David Solomon, CEO of Goldman Sachs, reportedly said at a private meeting with Goldman Sachs executives earlier this year, "It was a mistake not to start layoffs sooner."
Goldman Sachs has launched a company-wide cost-cutting campaign, including halting new investments, selling private jets, and reducing travel expenses. Including this round of layoffs and hiring freezes, the goal is to cut costs by a total of $1 billion (approximately 1.32 trillion KRW).
The reason Goldman Sachs, representing Wall Street, has embarked on a high-intensity tightening is due to a significant deterioration in earnings in its core corporate finance division amid recession concerns. Goldman Sachs, which heavily depends on the corporate finance division's performance, did not benefit from the high-interest rate environment or the spillover effects from regional bank deposit outflows, resulting in a 18% plunge in net profit to $3.23 billion in Q1 compared to the same period last year. In particular, net profit in the corporate finance segment dropped sharply by 26% year-on-year.
This contrasts with other major U.S. banks such as Bank of America, JPMorgan Chase, Wells Fargo, and Citigroup, which focus on retail banking and all posted better-than-expected strong earnings.
With cash drying up in the market due to high interest rates and corporate finance sectors such as stock and bond issuance and mergers and acquisitions (M&A) severely depressed, a rebound in the industry is expected to be difficult this year as well. Foreign media analyzed, "Last year, Wall Street executives expected the corporate finance market to rebound this year, but ongoing tightening, uncertain economic conditions, and the regional banking crisis are continuing to weaken companies' financial strength, negatively impacting the market."
According to financial information firm Dealogic, global M&A volume in Q1 this year shrank 48% year-on-year to $575.1 billion (approximately 761 trillion KRW), marking the lowest level in over a decade since 2012.
Morgan Stanley, which also heavily depends on investment banking division earnings alongside Goldman Sachs, is planning additional layoffs. According to Bloomberg News, Morgan Stanley plans to reduce its global workforce by 3,000 employees by the end of Q2. This corresponds to about 5% of Morgan Stanley's global workforce of 82,000.
This layoff comes just five months after the December layoffs last year, which cut about 1,600 to 1,800 employees, approximately 2% of the total workforce. At that time, Morgan Stanley had stated there would be no further layoffs. In addition, Bank of America, Wells Fargo, and Citigroup have also announced plans to reduce their workforce.
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