Goldman Sachs Prepares for Layoffs as Deal-Making Slows

Still, for executives across Wall Street, assessing the requisite size for layoffs can be difficult. There are conflicting signs about the state of the U.S. economy, with some estimating that it may already be in a recession, or about to enter one, while others believe that there will be a slowdown but no contraction. And deal-making, which can return as quickly as it fades, has shown recent signs of optimism, like the upcoming initial public offering of Porsche, That makes bankers wary of finding themselves understaffed should deals begin to roar again.

But for now, Wall Street banks may simply have too many deal makers.

“They just don’t need as many bodies as they have,” said Chris Connors, a vice president at Johnson Associates, a compensation consulting firm. “Production has fallen off a cliff.”

The New York Times / September 12, 2022

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Layoffs and Lower Pay on the Way for Asset Managers – Report

‘There are two key drivers contributing to the decrease,’ said Chris Connors, VP at Johnson Associates, ‘The primary driver is the market decline this year.’

Among fears of recession and rising inflation, major indices in the US are down this year, with the S&P down about 14% and the Bloomberg Aggregate Bond index down about 8%. Both have recovered since mid June when they were down some 23% and 12%, respectively.

Connors’ second factor, which is related to market falls, is the outflows suffered by many asset managers this year, especially from active equity funds. Investors pulled $408bn from active funds in the first six months of 2022, with $91bn of that leaving in June, according to data from Morningstar.

‘So the combination of those two things has led to a decrease in revenues in the asset management space, and bonus pools will decline as well,’ said Connors.

‘The purchasing power of the dollar is down because inflation is running rampant. So, if incentives are down 15% to 20%, and inflation is also at 8%, then your incentives are down more than 15% to 20%,’ said Connors, ‘So we think firms should be cognizant of this in terms of the salary increases, the impact of headcount going into the end of the year, and restructuring going into 2023.’

Citywire / August 5, 2022

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Wall Street Bonuses Poised to Plunge Following Slowdown in Deals

“2021 was a fabulous year and this is a real downer,” Alan Johnson, managing director of Johnson Associates, said in an interview. “We’ve had bonus declines before, but you overlay that with inflation by the end of the year and I think it’s going to be particularly painful.”

Investment-banking revenue fell 43% in the first six months of 2022 from a year earlier at the five biggest Wall Street firms. Persistent inflation, recession fears and global turmoil including Russia’s invasion of Ukraine brought on wild market swings, keeping clients on the sidelines. And the battle for banking talent has cooled, with the biggest companies more mindful of their expenses.

Equity traders, on the other hand, could see their bonuses climb 10%, while their fixed-income colleagues may enjoy a 20% increase, with the same market tumult boosting trading revenue.

“This year the traders will be subsidizing some of their colleagues in investment banking,” Johnson said. “You only like that if it’s coming toward you, not going away from you.”

“Seven-plus months into the end of the year, anything is possible, but it’s very, very unlikely it’s going to make too much of a comeback,” Johnson said. “Wall Street goes up and down — this is a down year.”

Bloomberg / August 4, 2022

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Job Cuts and Smaller Bonuses Loom for Wall Street Amid Collapse in IPOs and Stock Issuance

“There are going to be a lot of people who are down 50%,” Alan Johnson, managing director of the namesake firm, said in an interview. “What’s unusual about this is that it comes so soon after a terrific year last year. That, plus you have high inflation eating into people’s compensation.”

“We will have layoffs in some parts of Wall Street,” Johnson said, adding that job cuts may amount to 5% to 10% of staff. “I think many firms will want their headcount to be lower by February than it was this year.”

The news hasn’t been uniformly bad, however. Firms will have to boost workers’ base salary by roughly 5% because of wage inflation and retention needs, Johnson said.

What’s more, there have been sections of Wall Street that have thrived in the current environment. High volatility and choppy markets may dissuade corporations from issuing debt, but it’s a good setup for fixed income traders.

Bond traders and sales personnel will see bonuses rise by 15% to 20%, while equities trading staff could see increases of 5% to 10%, according to the report. Traders at hedge funds with a macro or quantitative strategy could see bonuses rise by 10% to 20%.

“My clients realize it will be a very difficult year,” Johnson said. “The challenge is how you communicate this and make sure the right people get paid.”

CNBC / August 4, 2022

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Wall Street’s Lavish Bonuses Are Getting Slashed

“It’s been a real shock,” Alan Johnson, managing director of the firm, told me. “I don’t think any of us really appreciated how much the pandemic stimulus created a bubble … now the lights have come on and it’s a little ugly.”

Of course, Johnson says, these firms are still very profitable. “They went from making two tons of money, now they’re going to make one ton of money,” he tells me. “But it’s still a ton of money.”

It’s no surprise that Wall Street bonuses should wax and wane with the fate of the markets. But what’s shocking to Johnson is how fast the tables turned this year. Banks that went on hiring sprees in the boomtimes of 2021 are in a bind now, likely realizing in hindsight they overstaffed. “There will be layoffs — not massive layoffs, but I they’ll certainly be layoffs at the end of the year,” Johnson says.

Of course, no one’s celebrating the prospect of handing out pink slips or scaling back pay. But neither is anyone throwing a pity party for the well-to-do Wall Streeters who are about to get haircut.

“The problems here are of course dwarfed by the problems of people in real world,” Johnson says. “It’s bad when your bonus goes for a $1 million to $600,000, but that’s still $600,000.”

CNN / August 4, 2022

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Analysis: Wall Street Weighs Job Cuts as Deals Slide in Battered Markets

Tough times this year and a “mediocre” outlook for 2023 will prompt investment banks to cut 5% to 10% of their staff and reduce compensation for those who remain, said Alan Johnson, managing director at compensation consultancy firm Johnson Associates.

“They are not going to pay as well,” said Johnson. “People are putting lists together – usually this will begin after Labor Day. With the advantage of hindsight, firms have too many people.”

Reuters / July 26, 2022

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