Goldman Sachs Group Inc. is warning investors of a sharp slowdown in its investment bank from the bumper gains a year ago, as the bank hunkers down in the face of an “extraordinarily challenging” economic backdrop.
“We are now embarking on additional targeted action with our headcount,” Goldman president John Waldron said at a conference hosted by AllianceBernstein Holding LP. “We are preparing for a tougher environment.”
Waldron said the bank’s trading business is trending down more than 25 percent this quarter compared with a year ago. He also described capital markets activity as “sluggish,” although there are some signs of strength in equity capital markets.
The investment bank is observing “a pretty risk-off tone” from its clients, Waldron said, with corporate chief executive officers also pretty cautious. “Feels like we are going to have a contractionary environment for a period of time.”
Goldman is working on what would be its third round of job cuts in under a year, Bloomberg News reported earlier this week. The New York-based firm eliminated hundreds of jobs in September, followed by about 3,200 cuts at the start of this year. The moves this time are expected to affect less than 250 people and will include more-senior employees at the firm, one of the people with knowledge of the plans said, asking not to be named discussing private matters.
In February, Goldman Sachs outlined plans for about $1 billion in expense reductions. Waldron said the bank is on target to achieve that goal.
On Wednesday, Morgan Stanley co-president Andy Saperstein gave a gloomy forecast for the bank’s sales and trading and dealmaking operations. “Sales and trading is softer this quarter,” he said. “Results will be notably down year-over-year.”
Saperstein also said investment banking is “very challenged. As an industry, we have been in a sustained trough since last year.”
Analysts have forecast Goldman Sachs revenue this year will be roughly in line with what it posted last year, at about $48 billion. That’s still more than $10 billion less than what the firm notched in 2021 during a frenzied period of dealmaking and heightened trading activity.
Goldman executives have been trying to make a more forceful case for shareholders to appreciate its $2.7 trillion asset- and wealth-management business. The top brass sees the unit, dubbed AWM, as critical to unlocking a higher valuation for the bank, whose stock is trading at about the same level where it was two years ago.
