Goldman Sachs is cutting about 5% of sales and trading staff after senior equities leaders delivered a tough town hall talk

Business Insider | Mar 15, 2019, 03.45AM IST

David Solomon

  • Goldman Sachs is cutting about 5% of the people in its sales and trading division, according to a person with knowledge of the matter.
  • Each year, Goldman culls underperformers across the company, with the percentage dependent on the performance of the business and future growth prospects.
  • At an equities town hall on Monday before the cuts were announced, a top equities exec told staff that he'd have zero tolerance for them if they didn't buy into the culture of renewed collaboration that new CEO David Solomon is trying to instill.

Goldman Sachs is in the process of cutting roughly 5% of its sales and trading staff, as new CEO David Solomon conducts a review of the business and looks for ways to improve collaboration between the divisions.

The company notified staff in the securities division of the cuts this week, including those employees who deal with clients trading stocks, bonds and currencies, according to a person with knowledge of the matter.

Staff in commodities were told earlier this month. Bloomberg reported that at least 10 commodities employees had been fired.

Each year Goldman Sachs culls its underperforming staff to make way for new recruits and lateral hires. While the percentage each year can vary - the bank cut 10% of fixed-income staff several years ago - the target is generally 5%. Certain businesses within sales and trading likely suffered bigger or smaller cuts.

At an equities town hall on Monday before the cuts were announced, Jeff Nedelman, one of four execs running the business, spoke directly and frankly to those gathered.

Nedelman, according to a person who heard his remarks, said there won't be any tolerance for a lack of cooperation or coordination with the firm. Nedelman mentioned the company wide philosophy, One Goldman Sachs, coined by Solomon to foster better collaboration, the person said.

Also on Thursday, Goldman announced the dismissal of 65 people in a filing with New York state labor officials. Those employees have already been informed, meaning this week's layoffs will likely show up in future filings.

Within the securities division, the equities business has suffered some recent high profile departures. Jack Johnston, a top-performing salesman with large hedge fund clients, left for rival JPMorgan Chase, people familiar with the matter told Business Insider. Johnston will cohead the US equity sales trading business at JPMorgan, the people said.

It's the second senior defection in Goldman's equities division in the past week. Danielle Johnson, a managing director in the bank's client relationship management group, was poached by Credit Suisse to co-run its Americas equities business, Bloomberg reported last Friday.

Goldman Sachs's equities business was ranked number one for years before giving way to Morgan Stanley after the financial crisis. And JPMorgan has been heavily investing in the business in recent years, poaching from Goldman and increasing competition among the three.

Goldman Sachs reported $7.6 billion in equities revenues in 2018, a 15% increase from 2017. JPMorgan reported $6.9 billion, a 21% uptick from 2017 while Morgan Stanley pulled in $9 billion, a 12% increase.

Get the latest Goldman Sachs stock price here.

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