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Thursday, October 23, 2008

Goldman Sachs will shed about 3,200 workers, or 10 percent of its staff

Goldman Sachs Group Inc., the only firm among Wall Street's five biggest to remain profitable through the credit crisis, will shed about 3,200 workers, or 10 percent of its staff, as the revenue outlook worsens, according to a person briefed on the plans who declined to be identified.
The cuts add to more than 130,000 jobs eliminated in the financial industry since mid-2007, eclipsing the cuts after the Internet bubble burst in 2001. Paul Kafka, a Goldman spokesman in London, wouldn't comment. Goldman had 32,569 employees at the end of August, up 3 percent from May and 9 percent for the year.
Banks worldwide are shelving deals and cutting jobs as the unprecedented turmoil in credit markets spreads and spurs concern the global economy may fall into a recession. Goldman, which converted to a bank holding company last month and is receiving $10 billion from the U.S. Treasury, has dropped by almost 50 percent in New York trading this year.
``When a lean and mean firm starts trimming, they're cutting into muscle,'' said Shaun Springer, chief executive officer of Napier Scott Executive Search Ltd. in London. ``The fact that they are cutting 10 percent is quite indicative of the fact that there are still a lot of problems ahead.''
The new job cuts signal a reversal in strategy at Goldman since Sept. 16, when Chief Financial Officer David Viniar told analysts he expected the number of Goldman employees to increase by a percentage ``in the low single digits'' this year, excluding the purchase of a mortgage servicing company.
Nine-Month Revenue
The firm's revenue for nine months this year slid 32 percent from a year earlier, as investment banking fell 26 percent and trading and principal investment plunged 45 percent. Revenue may drop 38 percent in the quarter that ends in November, according to the average estimate of 12 analysts surveyed by Bloomberg.
Mergers and acquisitions, in which Goldman is the top-ranked adviser for the eighth consecutive year, have declined by almost one third this year, and global equity offerings have tumbled 39 percent, Bloomberg data show.
The company has booked $4.9 billion of losses on devalued assets such as mortgage securities and leveraged loans, a fraction of the writedowns taken by rivals such as Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley.
Citigroup has cut 24,000 jobs in the past 18 months, more than any other bank in the world, according to data compiled by Bloomberg. Lehman Brothers Holdings Inc., which filed for bankruptcy last month, eliminated almost 14,000 jobs, the data show.
Further Reductions
Other financial firms are planning further reductions. Merrill Lynch may cut more than 10,000 jobs after Bank of America Corp. completes its $50 billion acquisition of the firm, Ladenburg Thalmann Inc. analyst Richard Bove said this week. The Wall Street Journal reported Goldman Sachs's plan to cut jobs earlier today.
Banks may cut 62,000 jobs in London by the end of next year, reducing employment in the industry to the lowest level in more than a decade as the credit crisis worsens, the Centre for Economics and Business Research estimated this month.
In New York, state budget planners expect a loss of 40,000 financial jobs this year.


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