Goldman Sachs, one of the largest banking groups in the world could suffer losses of hundreds of millions of dollars in the third quarter, the first negative financial results after the financial crisis of 2008. Bank is likely to take additional measures to reduce costs by 1.45 billion dollars (1.08 billion euros), writes The Telegraph.
In an extensive restructuring program, Goldman Sachs will lay off more employees very well paid and will replace them with fresh graduates who are content with lower wages. However, the U.S. bank will maintain the bonuses for employee performance.
The situation of the one of the largest U.S. credit institutions reflects the vulnerability of U.S. banking system to the sovereign debt crisis in Europe. In fact, Goldman results are only one of the bad news coming from U.S. banks, which face high market volatility, with the anemic U.S. economic growth and merger and acquisitions almost nonexistent. Furthermore, analysts expect more companies to report negative third-quarter financial results.
The bank previously announced a comprehensive program to reduce costs by 1.2 billion dollars by 2012. Losses for the third quarter estimated by UBS analysts at 392 million dollars (293 million euros) and British counterparts at Barclays at about 180 million dollars (135 million euros) could force the bank to take further steps to save another $250 million.
Recruitment firm experts on Wall Street believe that Goldman, along with other U.S. banks, could abolish several posts to be able to give employees performance bonuses. According to statistics, Goldman, along with Citigroup, JP Morgan, Morgan Stanley and Bank of America spent 65.7 billion dollars (49 billion euros) in compensation and benefits.
“Some people will have to adjust their living standards, but we are still the number one bank and the markets will be rehabilitated and life will be better when we make money again”, said a bank representative.
Trading income of U.S. banks plummeted during the summer due to the collapse of capital markets, volatility of many asset classes and investor pessimism. Credit Suisse analysts estimate that the negative trend recorded on the stock market will considerably reduce earnings for Goldman Sachs by 37% compared with same period last year. However, the division of investment bank could see a fall in income by 29%.