An expensereview at Goldman Sachs Group Inc.helped fuel the departure of more than 2,000 employees during the second quarter,CFO Harvey Schwartz saidJuly 19 during an earnings conference call.
Schwartznoted that the hiring of 600 analysts helped to partially offset recent headcountreductions, but Goldman Sachs still reported a 5% drop in its total staff as thenumber of employees, consultants and temporary staff fell to 34,800 at the end of the second quarter from 36,500at the end of the first quarter. Schwartz said that the company reviews staffinglevels on an annual basis, and it can sometimes lead to headcount increases.
In 2015,Goldman Sachs saw a headcountincrease of 1% at the end of the second quarter from the end of the 2015 first quarter.In 2016, Goldman Sachs needed to make cuts in an effort to combat the challengingbusiness environment, Schwartz said.
For thefirst half of 2016, Goldman Sachs' net earnings were down 24% year over year while total net revenues were down28% year over year. Schwartz noted that with the performance drop, the company'scompensation and benefits expense fell 28% year over year for the first half of2016.
He addedthat the company completed the expense initiative during the second quarter, andit will lead to a run rate of about $700 million in annual cost savings. However,Goldman Sachs will only realize about $350 million of the cost savings in 2016 becauseof severance charges.
Duringthe earnings conference call, an analyst said Goldman Sachs' second-quarter headcountreduction was a large one to make in a short period of time and asked how the companyknew that it was making the right decisions. Schwartz said the company is not sacrificingits commitment to clients and noted each of Goldman Sachs' businesses makes itsown headcount suggestions.
Schwartznoted that struggling businesses such as fixed income saw the largest staff reductions.For the first half of the year, Goldman reported a 24% year-over-year drop in revenuefrom fixed income, currency and commodities client execution.