Goldman Sachs restructuring could hit traders’ bonuses

Goldman Sachs deserves all the applause for secrecy. Everyone knows Credit Suisse is planning a major restructuring announcement at the end of this month, but who knew Goldman Sachs was concocting its own restructuring? No one, until the wall street journal announced the news late last night.

Admittedly, that of Goldman is less dramatic. While Credit Suisse is planning changes that could result in the loss of 6,000 jobs and the sale of its securitization business and some Swiss assets, Goldman’s intentions are more moderate. It simply intends to rationalize its organization into three areas: investment and trading banking, asset and wealth management, transaction banking. This compares to the four “segments” the company currently has: investment banking, global markets, asset management, and consumer and wealth management.

Unlike Credit Suisse, Goldman’s reorganization is not explicitly tied to job cuts and could simply be viewed as a change in internal nomenclature. And yet it is conceivable that cuts will result: merging divisions is a clear path to ‘efficiencies’ and can reduce the need for two sets of staff in certain support functions. It can also lead to changes at the top: leaders of small divisions who are not appointed leaders of large divisions are subject to sudden retirement.

Most of the time, however, Goldman’s changes look like bad news to anyone in Marcus’ consumer banking segment, which has suddenly been subsumed by the much larger asset and wealth management division after having accumulated cumulative losses of $4 billion. Conversely, they look like good news for anyone in the transaction banking business, TxB, which has been given a division of its own. In investment banking and global markets, Goldman’s changes appear superficially less significant, but could have a real impact. They will point out how – despite all its attempts to diversify – Goldman remains an investment bank: global banking and markets activities generated 78% of the company’s revenue in the second quarter.

Goldman’s combination of its global markets and investment banking business could weaken the small investment banking firm’s internal influence at a time when revenues there are falling and bonus pools for 2022 are in jeopardy. finalization course. Currently, the investment banking business is co-led by Jim Esposito and Dan Dees, while global markets is led by Ashok Varadhan and Marc Nachmann. Nachmann is already transitioning to the new asset and wealth management division, and one of Dees or Esposito is also expected to leave. Goldman Sachs will announce its third-quarter results tomorrow and, like other banks, revenue from its investment banking division likely fell. The changes could potentially leave the investment bank more exposed to bonus cuts and pruning. Similarly, however, it could be argued that fixed income traders who have done well this year will now be more compelled to subsidize their colleagues in the investment banks with whom they are grouped in a single division. Bond traders who thought they would get big bonuses from self-employment in global markets could see their bonuses drastically reduced now that they are in bed with disastrous investment bankers.

On the other hand, if a bank is cutting costs and really wants to get rid of you, the sad story of Deutsche Bank’s Elisabeth Maugars suggests giving up some salary won’t make much difference.

Maugars, who was a doctor, is suing Deutsche Bank for gender and age discrimination. Bloomberg reports that DB let her go during a cost-cutting round in early 2020, even though she had just given up a month’s salary to try to help the bank cut costs. She was 57 at the time. Maugars claims colleagues at Deutsche also called her Christine Lagarde in reference to her French nationality and white hair.

Meanwhile…

Morgan Stanley’s James Gorman says the bank is looking at the workforce. “We’re obviously looking at the workforce… You have to take into account the growth rate we’ve had over the past few years and we’ve learned some things during Covid about how we can operate more efficiently. That’s something the management team works by the end of the year.” (Financial news)

Citi is still hiring bankers. “We continue to invest in building our teams for long-term growth opportunities, including healthcare, technology and energy,” said Citigroup CEO Jane Fraser. “And I’m really excited about the high caliber bankers who are attracted to both our platform and our culture.” (Reuters)

Jamie Dimon says JPMorgan won’t wait until next year to hire and the bank continues to spend in line with its Investor Day commitments. (Business Insider)

KPMG has promoted 108 new partners but they will not be able to share the profits. (The temperature)

The UK’s Financial Conduct Authority (FCA) wants 15 people to work in its wholesale crypto policy unit, including senior executives and junior data analysts in digital assets. (Financial News)

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