Morgan Stanley plans to cut 6 per cent of its institutional securities staff starting this week, two people familiar with the matter said on Wednesday, the latest sign of a pullback on Wall Street as revenue from trading and deal-making remains in the doldrums.
Combined with related job cuts among support staff, Morgan Stanley's work force reduction will amount to 1,600 people, said the sources, who were not authorized to speak publicly about the matter.
Morgan Stanley chief Executive James Gorman has pledged to reduce costs, and said in July that he planned to reduce overall staff at the firm by 7 per cent in 2012. The new job cuts – which target sales, trading and investment banking staff as well as workers who support those operations in areas like technology – come in addition to that plan, the sources said.
"This continues the steady drumbeat of negative news from banks," said Greg Cresci, a Wall Street recruiter with New York-based Odyssey Search Partners. "It's hard to tell where the bottom is, given how many banks have made similar announcements."
For the past two years, Morgan Stanley and other banks have been dealing with a revenue drought in their trading and investment banking businesses as activity remains weak, particularly in once-lucrative trading areas. New regulations that ban certain kinds of trading or make it more costly are also prodding banks to exit businesses and reduce staff.
Morgan Stanley's latest cuts come in addition to work force reductions that took place or were announced last year across the industry.
Its main rival, Goldman Sachs Group Inc., cut 700 jobs during the first nine months of 2012 as part of a plan to reduce annual expenses by $1.9-billion (U.S.). Analysts expect the firm's compensation pool to be much lower in the fourth quarter.
Citigroup Inc. announced plans last month to cut 11,000 jobs, including some in investment banking and trading, to save $1.1-billion in annual expenses. Credit Suisse Group AG is also cutting securities jobs to reach an annual cost-savings target of 1 billion Swiss francs, while UBS AG said it would cut 10,000 jobs and exit the fixed-income trading business amid losses and new regulations.
Bank of America Corp. is also in the process of cutting 30,000 jobs across the firm in a plan unveiled in 2011 aimed at saving $5-billion in annual expenses.
Although Morgan Stanley's layoffs will affect all staff levels, it will be targeted at more senior employees who take in the biggest paycheques, said one of the sources.
About half of the job cuts will occur in the United States, with the rest affecting international units, said the source, adding that all levels of staff will be affected, with an emphasis on more senior employees.
Morgan Stanley does not regularly disclose the number of employees in its institutional securities business, but had 57,726 employees worldwide as of September 30. The company is expected to report year-end figures in the coming weeks when it discloses fourth-quarter earnings.