“Goldman Sachs Group Inc. is reducing its world-wide staff of investment bankers by about 12% amid a slowdown in key businesses, according to people familiar with the matter,” writes Michael Siconolfi in today’s Wall Street Journal.

“Goldman’s reductions are affecting more senior-level professionals compared with the cuts made so far at other Wall Street firms during the current downturn. Its cutbacks will total nearly 150 banking professionals, including some of the big securities firm’s more-seasoned managing directors and partners, along with some less senior associates and vice presidents, the people say.”

“Despite the investment-banking cuts, however, the size of Goldman’s total staff of about 23,000 could be up 2% to 3% by year end after additions to other areas of the firm, including its asset-management and bond businesses.”

“The way Goldman is thinning staff underscores a broader effort on Wall Street to avoid mass layoffs. Instead, like other securities firms, Goldman is quietly eliminating hundreds of jobs through such steps as tougher employee reviews, attrition and transfers from areas where business is weak to operations that haven’t slowed. Many rivals including Morgan Stanley, Merrill Lynch & Co., Citigroup’s Salomon Smith Barney and Charles Schwab Corp. have had significant cuts this year amid difficult markets. As with other firms, Goldman is drawing up contingency plans for more-drastic actions should the slowdown worsen.”

“Goldman’s action reflects a concern on Wall Street that the profit picture for securities firms won’t brighten soon. Despite the recently buoyant stock market, activity hasn’t picked up much in such high-margin areas for investment bankers as underwriting of initial public stock offerings and advising on mergers and acquisitions.”

“So far this year, the fees Wall Street firms have earned from underwriting IPOs has totaled $533 million, down 67% from the $1.6 billion in the year-earlier period, according to Thomson Financial, a Newark, N.J., research firm. Goldman, for its part, has received IPO fees totaling $153 million this year, compared with $374 million a year earlier, according to Thomson.”

“The Goldman plans ‘show how the investment-banking business has just dropped off the table,’ says Alan M. Johnson, managing director of Johnson Associates Inc., a Wall Street compensation-consulting firm. ‘In prior years, firms would have done it much sooner and more aggressively,’ Mr. Johnson says. ‘It’s a little surprising it’s taken this long.’ “

“Goldman’s strategic moves are widely watched on Wall Street, and with good reason: The white-shoe firm has been among the industry’s most profitable. In fiscal 2000, Goldman had record net income of $3.25 billion. But earnings have slipped this year; Goldman’s fiscal first-quarter net fell 13%, to $768 million amid a decline in investment-banking revenue. The current quarter has been difficult as well, bankers say.”

“Staff reductions for Goldman’s broader investment-banking group, which also includes stock-research analysts, could be just 4%, the people say, because of the addition of new associates, among others.”