Goldman Sachs Group is planning to reduce its workforce in its fixed-income division by 10% this quarter. The bank will eliminate the least-productive employees from the business unit, according to the Wall Street Journal based on information from sources familiar with the situation.
Goldman Sachs is implementing job cuts amid the tightening regulations and declining revenues from the trading markets. The sources said around 250 people will be affected by the workforce reduction.
Market observers suggested that the bank capitulated to the increasing pressure to strengthen balance sheet in the wake of an industry-wide revenue decline.
A related report from Bloomberg indicated that Goldman is still evaluating its client activity before making its final decision on the job cuts. The bank typically reduces its workforce after conducting an annual performance evaluation.
Goldman Sachs is preparing to cut more jobs this year
The bank is planning to implement more job cuts at its debt, currencies, and commodities business units this year, according to the sources. In March, the bank reduced its total workforce by approximately 5%.
Goldman Sachs’ decision demonstrates that its current situation in bond trading is difficult. The bank historically generated enormous profits in the business, and it was more committed than its peers on the debt markets.
The revenues of the bank’s currencies, commodities, and fixed-income business fell since New Year. The bank’s revenue from total equities from its institutional client services unit also dropped. The declines affected its overall sales performance.
Glenn Schorr, an analyst at Evercore SI, told the WSJ, “If any company in the business wasn’t doing some version of this; that would be a bigger question. We’ve had an industry revenue pool go down by 60%, and you need to constantly adjust.”
Mr. Schorr added, “I’m going to rely on Goldman management to know the difference between fat, and muscle and bone. It’s a very difficult balancing act.”
Goldman Sachs will remain a big player in fixed-income business
The second half of 2015 was very challenging for debt traders. Concerns regarding economic growth, commodity prices, and public policy prompted many investors to become cautious and unwilling to take risks. These issues “appear to be continuing into 2016,” according to analysts at Barclays.
In October, Goldman Sachs CFO Harvey Schwartz stated that the bank reduced more than 10% of its fixed-income staff over the past several years and cut 20% of its balance sheet. According to him, “In this part of the cycle, we have been very disciplined about how we manage those resources.”
In December, Goldman Sachs CEO Lloyd Blankfein repeated the bank’s position to remain a big player in the fixed-income business. He said they have no intention to implement deep cuts.