Bull Bear Report Jul 19 2011

Goldman Plans 1,000 Job Cuts

By julie steinberg

Goldman Sachs said it may cut 1,000 jobs as it plans $1.2 billion in expense reductions over the next year.

In its conference call announcing second quarter earnings, Goldman Chief Financial Officer David Viniar said business lines across the company are reining in expenses and job cuts could take place at both senior and junior levels. He didn't specify which businesses would be affected.

After compensation, Goldman's biggest expense is operations, items such as the cost of travel, phone usage and building maintenance. "If we cut some heads in New York, that wouldn't cut operating expenses," Viniar said on the earnings call.

Total headcount, including employees, consultants and temporary workers, increased by 100 in the second quarter compared to the 2011 first quarter, the company noted in its earnings statement. The firm employed 35,500, up 4%, or 1,400 workers, from last year's second quarter.

For the second quarter, average compensation per employee was $90,253, down from $111,495 in the second quarter of 2010. The ratio of compensation and benefits to net revenue rose to 44% in the first half, compared to 43% in the first six months of 2010.

Goldman's overall second quarter earnings disappointed analysts, rising to $1.85 per share on revenue of $7.3 billion compared to $0.78 per share on $8.8 billion in the year earlier period. Analysts had expected $2.27 a share on $8.1 billion in revenue for this quarter

The firm suffered from a sluggish trading environment: fixed income, currency and commodity revenue fell 53% from a year earlier. Revenue from investment-banking rose 54% from the year earlier period.

Write to Julie Steinberg

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