Goldman Sachs Group Inc. announced a 48% decrease in profit for the second quarter of FY2022 cushioned by the strength in fixed-income trading but issued a warning that it could restrict hiring and curtail spending as the economic outlook deteriorates. The global financial markets have been shaken by the increase in interest rates by the US Federal Reserve, albeit this measure is intended to rein in spiraling inflation. As a result, businesses are less eager to conduct transactions and are wary of stock and debt offers. Releasing the results on July 18, 2022, Goldman Sachs stated that investment banking revenue in Q2 2022 dropped 41% to $2.14 billion due to lower fees from equity and debt underwriting, besides advice on stock listings, and mergers and acquisitions.
Reduction in Hiring to Cut Costs
Even though Goldman Sachs reduced compensation and benefits in the second quarter in comparison to that in the corresponding period of 2021, the company still recorded higher costs from expansion initiatives. To save costs, Goldman Sachs Group Inc. said that it intends to curtail recruitments and bring back annual performance assessments. At the end of June 2022, the bank had 47,000 employees, up from 41,000 by the end of June 2021. The company’s CFO, Denis Coleman, said that the bank will resume its tradition of conducting annual performance appraisals of employees, something Goldman Sachs had abandoned during the COVID-19 pandemic.
Volatile Capital Markets
Wall Street reported ideal conditions at the height of the pandemic, but so far in 2022, those conditions declined. A quick recovery from recession and brisk capital markets were the result of stimulus measures taken by governments and central bankers in reaction to the pandemic. The environment today is much less welcoming. With the S&P 500 recently ending its worst first half in more than 50 years, markets were thrown into a loop due to the highest levels of inflation in decades, dramatically higher interest rates, and serious geopolitical concerns. Corporate leaders are reluctant to go public or issue more stock because of this uncertainty. Although corporate clients of banks continue to endure persistent inflation in their supply chains, Goldman CEO David Solomon said that the firm's economists expect a slowdown in inflation for the remainder of the year.
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