Yahoo Finance Goldman Sachs to slow hiring, bring back performance reviews as Wall Street layoff chatter grows
Wall Street’s top dog is scaling back hiring as a slowdown in financial markets spurs talk of layoffs on Wall Street.
Goldman Sachs (GS) said Monday it will slow plans to onboard new employees and reinstate annual performance reviews paused during the pandemic, a strategy that has historically served to weed out laggard bankers.
As part of the cost-cutting measure, the investment bank will also decrease "replacement of attrition," or re-hiring for jobs that go vacant.
“Given the challenging operating environment, we are closely reexamining all of our forward spending and investment plans to ensure the best use of our resources,” CFO Denis Coleman said in a call with analysts on Monday. “Specifically, we have made the decision to slow hiring velocity and reduce certain professional fees going forward, though these actions will take some time to be reflected in our results.”
Goldman impressed investors on Monday with a smaller-than-expected 48% drop in second-quarter profit, with a slowdown in its underwriting business partially offset by strength in fixed income trading.
Still, investment banking revenue fell 41% to $2.14 billion during the period.
Goldman’s announcement comes amid growing speculation Wall Street is preparing to lay off workers as higher interest rates, market volatility, and signs of recession permeate the industry. Bank profits have also fallen sharply from a year earlier as institutions set aside funds for potential loan losses.
The New York Post reported Sunday that at a recent luncheon attended by executives from banking heavyweights including JPMorgan (JPM) and Morgan Stanley (MS), conversation was centered around hiring freezes and layoffs. Attendees predicted Wall Street could see its workforce slashed by at least 10%, with job cuts likely to begin later this year.
JPMorgan kicked off a lackluster season for bank earnings on Thursday when it reported a wider-than-expected drop in profit of 28% during the second quarter to $8.6 billion, or $2.76 per share.
The bank temporarily suspended share buybacks and set aside an additional $428 million in credit reserves to cover sour loans, pointing to a “modest deterioration in the economic outlook.” Morgan Stanley also revealed results that missed analyst expectations, dragged down primarily by a slump in investment banking revenue due to volatile market conditions.
Citigroup (C) was a bright spot in recent bank earnings, reporting an 11% jump in revenue for the period to $19.64 billion. Meanwhile, Bank of America saw its profit fall 34%, dragged down by a decline in investment banking revenue amid slower dealmaking activity.
JPMorgan has already begun cutting jobs in its home-lending division as rising mortgage rates and inflation drive a slowdown in the housing market. The bank is expected to lay off or reassign more than 1,000 employees, Bloomberg News reported last month.
And among other industries, namely tech and real estate, hiring pauses and job cuts have already been notable. Bloomberg News reported Monday that Apple (AAPL) plans to slow hiring and curb spending next year across certain divisions to "be more careful during uncertain times.”
—
Alexandra Semenova is a reporter for Yahoo Finance. Follow her on Twitter @alexandraandnyc
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
Download the Yahoo Finance app for Apple or Android
Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube
