WEBVTT - Sally Bakewell on Goldman's Cuts (Audio)

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<v Speaker 1>Okay, let's get to our next guest, and we're looking

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<v Speaker 1>into Goldman Sacks as it prepares for its biggest random

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<v Speaker 1>layoffs since the start of the pandemic. Discuss all this

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<v Speaker 1>is Sally Bakewell Bloom Big US finance team leader, Sally,

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<v Speaker 1>thank you some of joining us that that is this

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<v Speaker 1>really reflective of the wider industry and in banking and

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<v Speaker 1>investment banking or is it company specific? I think it

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<v Speaker 1>is a little bit reflective. So before the pandemic UM,

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<v Speaker 1>a lot of banks typically did have this kind of

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<v Speaker 1>annual cull when they would usually get rid of something

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<v Speaker 1>in the region of two to five percent of their

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<v Speaker 1>bottom performers UM. Now, because of the pandemic, they put

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<v Speaker 1>that on hold UM and gradually have started to do

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<v Speaker 1>it again. And now we understand we learned that Goldman

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<v Speaker 1>Sachs is planning to to let go of about several

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<v Speaker 1>hundred of its staff UM starting from this month. And

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<v Speaker 1>we can expect you know that the other investment banks

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<v Speaker 1>they faced similar to challenges they're battling inflation UM. They

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<v Speaker 1>have also seen a slump in dealmaking in investment banking.

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<v Speaker 1>And we understand that a lot of the cut cuts

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<v Speaker 1>with Goldman Sex were in that division, and so we

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<v Speaker 1>can expect that this sets the tone a little bit

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<v Speaker 1>for broader Wall Street and that we we might start

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<v Speaker 1>to see other banks following suit. No doubt though, there's

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<v Speaker 1>a lot of pressure to raise the salaries of key performers,

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<v Speaker 1>big producers. So are we hearing much about the overall

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<v Speaker 1>strategies that to sort of hold the line, because you know,

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<v Speaker 1>if you're letting three people go and then you're hiring

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<v Speaker 1>somewhere else and also raising salaries, you might just tew

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<v Speaker 1>the line. Yeah, that's right, And in fact we we

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<v Speaker 1>sort of have that dilemma played out in the comments

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<v Speaker 1>from the HSBC CFO today where they say they will

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<v Speaker 1>probably have to you know, materially raise pay for their

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<v Speaker 1>employees next year UM and that in order to kind

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<v Speaker 1>of battle inflation, which for a bank with two hundred

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<v Speaker 1>and twenty people, it's one of its um you know,

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<v Speaker 1>it has very very significant UM inflation related issues. It

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<v Speaker 1>may have to some undertake some pretty brutal cuts. I mean,

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<v Speaker 1>I think that any you think about that two thousand,

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<v Speaker 1>if you look at the number of people that work,

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<v Speaker 1>for instance, say at PayPal, you know you wonder whether

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<v Speaker 1>HSBC over the next many many years will cut headcount

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<v Speaker 1>just because it has to. Well, I mean, we're probably

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<v Speaker 1>not quite seeing the magnitude that we've seen in this

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<v Speaker 1>sort of tech space yet where you know, um, a

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<v Speaker 1>lot of the company is not speaking of papal here,

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<v Speaker 1>but they've faced, you know, a sort of crisis of

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<v Speaker 1>investment confidence, and so they've had to and they're facing

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<v Speaker 1>all kinds of challenges and they they've had to make

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<v Speaker 1>these huge sweeping cuts. UM. I don't think we're we're

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<v Speaker 1>going to see that with the US investment banks yet.

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<v Speaker 1>I think there, if anything, they'll probably be a bit

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<v Speaker 1>more targeted in some of their teams. Goldman, you know,

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<v Speaker 1>we perhaps could have expected a few more to be cut.

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<v Speaker 1>They telegraphed in July that they were slowing their hiring

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<v Speaker 1>velocity amid a challenging operating environment. So this number several

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<v Speaker 1>hundred doesn't feel like such a significant number. Of course,

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<v Speaker 1>it may transpire to be to be more um. But

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<v Speaker 1>you know, the banks, they are facing this sort of

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<v Speaker 1>inflation re challenge. We've already seen them start to trim

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<v Speaker 1>um a lot of their mortgage related bankers um and

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<v Speaker 1>so we can definitely expect to see more. However, I

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<v Speaker 1>mean that said you know, Citi CEO Jane Fraser, she

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<v Speaker 1>did rule out investment banking cuts UM and you know,

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<v Speaker 1>so it might not be that we see these huge

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<v Speaker 1>swathes and a bit more kind of trimming around the

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<v Speaker 1>edges in places, Sally. The thing is that the banking

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<v Speaker 1>has changed. It has a lot more competition from the

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<v Speaker 1>new economy now than it used to, and that has

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<v Speaker 1>of course changed the landscape because in the old days

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<v Speaker 1>the banks used to routinely over fire, then over higher

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<v Speaker 1>and just carry on with that sort of that vicious circle,

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<v Speaker 1>if you will, right, And it's kind of interesting now.

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<v Speaker 1>I mean just looking at JP Morgan UM for example,

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<v Speaker 1>it's just purchased a company, a kind of fintech payments firm, renovatee.

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<v Speaker 1>Uh so, you know, in its quest to try and

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<v Speaker 1>compete with technology in you know, in the new economy

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<v Speaker 1>online banking with apps UM with sort of the payment

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<v Speaker 1>apps that enable you to do these very quick transfers UM.

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<v Speaker 1>So it will of course probably be acquiring people in

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<v Speaker 1>that move UM and Goldman Sex. You know, while um

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<v Speaker 1>it it's headcount is about forty seven thousand UM two

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<v Speaker 1>years ago it was a little bit less than that,

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<v Speaker 1>so it's actually been adding people UM as they have

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<v Speaker 1>also been quite aquisitive to UM. So yeah, the banking

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<v Speaker 1>landscape now is of course very different, and they're trying

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<v Speaker 1>to compete with sort of the fintech space, but that

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<v Speaker 1>involves acquisition, which Bruce Head count UM just as much.

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<v Speaker 1>I was a little surprised to see the stark price

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<v Speaker 1>performance of hs spec actually up two point one in

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<v Speaker 1>London and uh, well it didn't trade yesterday because har

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<v Speaker 1>Kom Marca was closed. But with those comments by by

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<v Speaker 1>you and Stevenson and and nol Quinn about being being

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<v Speaker 1>short on their cost cuts by half a billion, that's

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<v Speaker 1>a lot of money. Yeah, and I think they also

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<v Speaker 1>said that they planned to hit their two percent cost

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<v Speaker 1>target UM and so with costs in focus so much,

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<v Speaker 1>I think if that's what they're telegraphing, that's probably why

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<v Speaker 1>the UM share price didn't, you know, didn't take a

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<v Speaker 1>massive massive hit and actually ticked up a little bit

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<v Speaker 1>UM And you know, if this is their way to

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<v Speaker 1>try and you know, I maybe investors are glad to

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<v Speaker 1>see that the bank is going to really keep a

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<v Speaker 1>lit on costs because that's the thing that they do

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<v Speaker 1>care about a lot. You know, JP Morgan for all

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<v Speaker 1>of its positive results, it took black and shareholders for

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<v Speaker 1>not keeping it on expenses. Yeah, excellent stuff, Sally, Thank you.

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<v Speaker 1>Sally Bakewell, Bloomberg US Finance team leader with US live

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<v Speaker 1>here