Goldman Sachs Plans Thousands of Layoffs, Expects to Eliminate Some Bonuses

Goldman also expects to slash, and in some cases eliminate, the annual bonuses of underperforming employees, people familiar with the matter said.

Like other Wall Street banks, Goldman hired aggressively throughout 2020 and 2021, bringing in new employees to help it keep up with an M&A boom. This year was a different story: An economic slowdown, war in Europe and rising interest rates triggered a bear market for stocks and a slump in deal making.

Morgan Stanley

also laid off workers this month, and similar cutbacks have swept through American companies.

Some of the job cuts at Goldman will be part of annual workforce reviews. In most years, Goldman eliminates underperformers during that process, but layoffs were suspended during the pandemic.

Taking away bonuses is another lever that Goldman can pull to trim expenses. Like most Wall Street employees, Goldman staff received a large portion of their compensation in annual payouts tied to their performance and that of the overall firm.

Employees who get no bonus usually interpret it as an invitation to leave. Eliminating bonuses for highly paid partners and other executives can also give the bank leeway to preserve compensation for junior bankers.

Semafor reported earlier on cutbacks at Goldman.

Investment bankers covering tech, including some managing directors, could be hit hard by layoffs, according to people familiar with the matter. The tech industry in particular fueled the pandemic stock run-up, and shares of tech companies are down drastically this year.

But if overhiring and overpaying staff during good times has been a standing tradition on Wall Street, then so have steep job and bonus cuts during lean years.

In 2020, the panic that gripped the markets early in the year as the coronavirus pandemic circled the globe quickly gave way a massive rally. The stock market routinely touched new highs and corporate deal making brought in blockbuster fees.

And the Wall Street firms, in turn, went on a hiring spree, often offering big bucks to lure new employees and keep current staff from jumping ship.

The party came to a halt this year. With uncertain markets and a recession potentially on the horizon, corporate clients went jittery. Wall Street firms have been forced to confront a steep slowdown in many of their businesses.

What’s more, Goldman’s prominence in investment banking and trading has made its results—and its stock price—more sensitive to the ebb and flow of the capital markets than many of its peers. Banks such as

JPMorgan Chase

& Co. have consumer-lending operations that dwarf Goldman’s. And in the years since the financial crisis of 2008-09, Morgan Stanley’s push into wealth and asset management has left it less dependent on deal fees than rival Goldman.

Goldman in October announced a reshuffling of its businesses, part of a push to draw more attention to its own asset and wealth management businesses, where it can clip relatively steady fees.

Morgan Stanley earlier this month cut about 2% of its global workforce, representing some 1,600 jobs. The layoffs followed the company’s acquisitions of discount broker E*Trade and fund manager Eaton Vance that resulted in an additional roughly 20,000 employees joining.

“We went from boom to bust immediately, so in hindsight [banks] probably overhired,” said

Alan Johnson,

managing director at Johnson Associates, a compensation consulting firm specializing in the financial services industry.

Next year “isn’t looking great either,” Mr. Johnson said.

— Peter Rudegeair contributed to this article.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com and Justin Baer at justin.baer@wsj.com