Wednesday, 12 November 2008

Morgan Stanley plans broad job cuts

Morgan Stanley plans to cut 10 percent of staff in its institutional securities unit and 9 percent in asset management, it said on
Wednesday, as it copes with a deteriorating economy, disrupted capital markets and falling asset values.

The cuts are in addition to roughly 4,800 jobs eliminated since the middle of 2007 by what was once Wall Street's second-largest investment bank.

It was not immediately clear how many employees will be affected by the latest cuts, or over what time period. A spokeswoman declined to comment. Morgan Stanley employed 46,383 people as of August 31, according to its website.

New York-based Morgan Stanley announced its cuts less than two months after converting into a bank holding company in the wake of Lehman Brothers Holdings Inc's (LEHMQ.PK: Quote, Profile, Research, Stock Buzz) bankruptcy.

The change requires it to lower leverage, potentially cutting profitability. The bank has slashed its asset base to below $800 billion from $987 billion at the end of August.

"We're in a period of tremendous dislocation," Co-President James Gorman said at a Merrill Lynch financial services conference. "We're very mindful of the environment that we live in at the moment, and we will continue to rationalize headcount and costs accordingly."

Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz), Morgan Stanley's main rival, also became a bank holding company in September. It set plans last month set plans to reduce 10 percent of its staff, or nearly 3,300 jobs.

In late morning trading, Morgan Stanley shares fell 80 cents, or 5.7 percent, to $13.28 on the New York Stock Exchange. They began the year at $53.11.


Gorman said the bank holding company structure will allow Morgan Stanley to tap a wider array of funding sources.

He said the company plans to bulk up in retail banking, including through "targeted" acquisitions, and preserve or expand operations in capital raising, cash trading, commodities, corporate credit, equity derivatives, foreign exchange, mergers and acquisitions and rates.

On the other hand, he said Morgan Stanley plans to "reshape" operations in prime brokerage, proprietary trading, principal investments and commercial real estate origination,

In October, Morgan Stanley raised $9 billion from Japan's Mitsubishi UFJ Financial Group Inc (8306.T: Quote, Profile, Research, Stock Buzz), and received $10 billion from the U.S. government's bank bailout plan.

Chief Financial Officer Colm Kelleher said the infusions leaves Morgan Stanley "well-capitalized, with excess capital."

Yet he said the company still faces "incredibly dislocated markets," including "gridlock" in efforts to sell or dispose of troubled assets. "I'm not sure who is buying it," he said.

He also said Morgan Stanley aims to fund half its assets with equity, long-term debt and deposits, up from 26 percent at the end of August.

Many other companies are also seeking more stable funding, and credit card issuer American Express Co (AXP.N: Quote, Profile, Research, Stock Buzz) this week also became a bank holding company.

"There are no quick fixes," Kelleher said. "There is no magic bullet that will suddenly solve the deposit question for institutions that are moving over from wholesale funding."

Source: EconomicTimes

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