EXCLUSIVE-Goldman to begin fresh round of job cuts -sources

Tue Feb 26, 2013 5:30am IST

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(Adds comments from CFO, equities volume data, background on industry cuts)

By Katya Wachtel and Lauren Tara LaCapra

Feb 25 (Reuters) - Goldman Sachs Group Inc (GS.N) plans to begin a fresh round of job cuts as early as this week, sources familiar with the matter said on Monday, with its equities-trading business bracing for bigger cuts than fixed-income trading.

The cuts come at the time of year in which the Wall Street bank typically gets rid of its weakest 5 percent of employees across the entire firm. But as the trading business continues to suffer from weak volumes and earnings, the losses are expected to be deeper in some businesses.

Equities trading will likely see cuts bigger than 5 percent, while fixed-income trading, which took big hits last year and has had better volumes, will likely see cuts of less than 5 percent, the sources said. The number of shares traded on major U.S. exchanges this year is down 7.2 percent.

It is unclear whether the cuts in totality will be larger than Goldman's typical 5 percent culling across the firm.

Big banks globally have been cutting staff for the past few years, as weak trading and dealmaking volumes and increased costs have put pressure on shareholder returns. Banks including Morgan Stanley (MS.N), Bank of America Corp (BAC.N), Citigroup Inc (C.N), and UBS AG (UBSN.VX) have all laid off staff or announced plans to cut thousands of jobs in the past year or two.

Goldman's latest round of dismissals follows the bank's layoffs of 3,300 employees, or 9 percent of its workforce, over the past two years.

Earlier this month, Goldman's new chief financial officer, Harvey Schwartz, said that laying off more workers may be the way that banks generate higher returns on equity for shareholders. The metric is important because it shows how much profit banks can squeeze from their balance sheets.

Last year, Goldman's return-on-equity was 10.7 percent, an improvement from 2011, but still well below its historical highs above 30 percent. Schwartz said he does not see Goldman's returns last year as "aspirational for the long term."

"I think the industry will migrate to higher returns because they will have to," Schwartz said, adding that it might be "a question of excess capacity coming out of the industry over a period of time."

(Reporting By Lauren Tara LaCapra and Katya Wachtel; Editing by Kenneth Barry; Editing by Maureen Bavdek)

((lauren.lacapra@thomsonreuters.com)(646-223-6116)(Reuters Messaging: lauren.lacapra.thomsonreuters.com@reuters.net)) Keywords: GOLDMAN CUTS/

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