Goldman Downsizing?

- - Adam Kidan, Business
Lloyd Blankfein

Lloyd Blankfein, CEO of Goldman Sachs

With chaos in the market, lowering oil prices and concerns about Deutsche Bank AG, shares for Goldman Sachs have begun to fall.  In response, the group’s CEO Lloyd Blankfein has signaled that the bank could end up cutting costs in the near future.  While speaking at the Credit Suisse financial services forum in Miami, Blankfein said that Goldman Sachs could possibly do a lot more “on the cost side” if it was necessary to deliver a return.  Saying that “necessity is the mother of invention”, he spoke about the need to take a concerted look at continued cost cuts.

Like its peers on Wall Street, Goldman has been struggling with low interest rates and strict regulations in the aftermath of 2008, which have lowered profits in areas like fixed income trading, which had previously been a wildly profitable venture.  Blankfein has said that the bank has already taken measures to cut headcount, which it has reduced 10 percent in its fixed income businesses since 2012.  During that time, Goldman has increased 11 percent overall in an effort to meet regulatory and compliance needs.

Currently, about 25 percent of Goldman’s employees are in lower-cost places, such as Bengaluru in India and Salt Lake City and Dallas out west.  In addition, Goldman has been looking to develop more open source software to reduce payments to outside vendors.  So far this year, shares of Goldman have declined 17 percent, which has raised a red flag to some.  Nonetheless, Blankfein is optimistic, believing that the global markets will improve, but hasn’t spoken about how that’s going to happen.

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Adam Kidan