(Bloomberg) -- Goldman Sachs Group Inc. Chief Executive Officer David Solomon struck a downbeat note about the economic outlook and said smaller bonuses and even potential job cuts should come as no surprise.
“You have to assume that we have some bumpy times ahead,” Solomon said in a Bloomberg Television interview Tuesday. “You have to be a little more cautious with your financial resources, with your sizing and footprint of the organization.”
That can mean a heightened focus on costs and a slowdown in hiring, which the bank has already undertaken. “That might also come from pruning in certain areas,” Solomon said.
Goldman’s business lines are closely linked to the economy, and the bank has forecast slowing growth ahead. That would mean the firm will have to make some tough decisions, Solomon said, especially since a soft landing is far from assured. Solomon said the US could see a recession in 2023, even though the firm’s economists say it could still avoid one.
“It shouldn’t be surprising to people — watching the performance of the business this year — that 2021 was an exceptional year,” the 60-year-old CEO said. “2022 is a different year, and so naturally compensation will be lower.”
The Wall Street giant is facing a tricky balancing act to keep a lid on total spending while rewarding its top performers. Solomon said he’s surprised by how resilient the competition for talent still is.
Goldman has been cutting costs to protect profits from a costlier-than-expected foray into consumer banking as well as the global economic slowdown, which is taking a toll on dealmaking.
“You have to expect that activity levels are going to be a little more constrained in a tougher economic environment,” Solomon said.
In remarks at the conference earlier in the day, Solomon, now in his fifth year as CEO, said that capital-markets activity had not yet rebounded the way the company had hoped. Goldman’s investment-banking revenue was down 45% through the first nine months of this year.
After announcing a pivot in his retail operations in October and scaling down its ambitions, Solomon said that he’s now focused on achieving scale and profitability for the new streamlined business line called Platform Solutions. That unit includes the New York-based firm’s nascent credit-card business, as well as the installment-lending operation GreenSky.
“We will pay people based on the overall performance of the firm,” Solomon said. “And especially for our senior people, we consider the overall performance of the firm as we go through our compensation process.”
(Updates with comment in eighth paragraph.)
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