Banking Giant Goldman Sachs plans to cut a fewhundred jobs in an effort to restructure its struggling consumer banking division amidst an uncertain economy next year.
According to some people with knowledge of the matter, the bank is drafting layoff plans that could cut off around 400 employees fromits retail banking division, which is making losses.
David Solomon, CEO of Goldman Sachs, said he is dialing back the ambitious plans made for the consumer banking unit. The new job cuts show the organization is going beyond the annual appraisal of weeding out non-performing staff only months ago when it was the only focus. Solomon also signaled that he was reviewingother business units to control overheads and limit operating costs.
Goldman Sachs spent a considerable amounton upgradingtechnologyand integratingoperations. It is now facing pressure onexpenses as analysts estimate the adjusted annual earnings will be only 44%. The firm faced a slump in its bonus pool as the rising costs in the consumer division, slow dealmaking, and decline in asset priceshit the reservesbig time.
A spokesperson from the organization declined to comment on the plans. According to one person speaking on condition of anonymity as they are internal deliberations, the plans are still being finalized.
Acquisitions for Diverse Asset Portfolios
Under CEO Solomon, the New York-based investment bankinggiant ventured out into new business lines withacquisitions beyond itscore businessprofit engineand built a more diversified bank. The acquisition contributed to the increase in headcount.
The bank workforce crossed 49,000 in QTR 3 this year,an increase of 34% from 2018 end. The bank has not given a breakup of headcount in the consumer division.
The retail consumer lending will stop disbursingloans in the coming months. It got a taste of unsecured lending, which was one of the main reasons for its departure from takingexposure with the financialelites.The unpaid debts led to the bank chasing them in local courts throughout the country.
Goldman Sachs is, however, committed to focusing on its existing high-growth products, such as the high-yield savings accounts that have attracted deposits from its customers.
The bank is withdrawing the launch of its checking account meant for mass retail consumers before the restructuring plan. It is reviewing how to make operating profits from a smaller target audience.
Goldman is also reviewingGreenSky; an installment financing company acquired in March. The space for this kind of lending has become crowded, with concerns rising duringuncertain economic times. Investors responded lukewarmly when the bank announced the company’s purchase. According to people familiar with the business, theunit hasunderperformed compared to projections.
Goldman had said in October it would convert GreenSky into Platform Solutions. This new cloud-based business line will include credit card and banking transactions.