Wall Street hunkers down as Goldman Sachs warns traders of shrinking bonus pools.

According to people who know the situation, Goldman Sachs traders and salespeople will have to contend with a bonus pool that’s at least 10% smaller than last year, despite producing more revenue this year. Consequently, the New York-based bank is experiencing a slowdown in most of its other businesses, including investment banking and asset management, which have been adversely affected this year due to rising interest rates and falling valuations. This week, Goldman began informing executives in its markets division about a smaller bonus pool for 2022, according to people who declined to be identified. A “low double-digit percentage will cut the figure,” Bloomberg reported, although pay discussions will be ongoing through early next year and could change, the people said. Wall Street is experiencing sharp declines in investment banking revenues after parts of the industry involved in taking companies public, raising funds, and issuing stocks and bonds seized up this year.

Goldman was first to announce companywide layoffs in September, and since then, Citigroup, Barclays, and others have laid off staff deemed underperformers. JPMorgan Chase will use selective end-of-year cuts, attrition, and smaller bonuses, and this week Morgan Stanley CEO James Gorman told Reuters that he planned to make “modest” cuts in operations worldwide. Despite the challenging environment, Goldman’s trading has been a bright spot. Geopolitical turmoil and central banks’ moves to fight inflation led to higher activity in currencies, sovereign bonds, and commodities, and the bank’s fixed-income personnel took advantage of those opportunities. Revenue in the markets division rose 14% in the first nine months of the year compared with the same period in 2021, while the company’s overall revenue fell 21%, thanks to large declines in investment banking and asset management results. Accordingly, the money the bank set aside for compensation and benefits also fell by 21%, to $11.48 billion through Sept 30.