Major global investment bank Morgan Stanley MS is slashing around 2% of its workforce with an aim to maintain operating efficiency. This was first reported by CNBC, citing persons familiar with the matter.
Specifically, several managing directors and executives in sales, trading and research operations as well as staff in the technology and operations units will be affected. Financial advisors in Morgan Stanley’s Wealth Management segment have been spared. Most of the employees affected by the move have been notified.
Morgan Stanley is likely to incur a charge of $150-$200 million in the fourth quarter related to this move.
Expected slowdown in global economy, low interest rates, ongoing trade conflicts and increased market volatility perhaps led to the job cut decision. Also, Morgan Stanley is trying to keep compensation costs under control as top-line growth is likely to remain under pressure in the quarters ahead.
During the third quarter conference call, CEO James Gorman had said, “We remain committed to controlling our expenses.”
For the nine months ended Sep 30, 2019, the company’s compensation and benefits expenses accounted for almost 45% of net revenues. Also, management targets to achieve efficiency ratio of less than 73% for 2019.
Though till now no other Wall Street firms have announced similar steps to control expenses, it is just a matter of time before biggies like Goldman Sachs GS, JPMorgan JPM, Bank of America and Citigroup C do the same.
Over the past several years, Morgan Stanley has been taking measures to improve efficiency, including reducing fixed income trading workforce and divesting commodities operations, and lowering dependence on capital markets. Also, the company has been diversifying revenue sources.
Shares of Morgan Stanley have rallied 25% so far this year, outperforming the industry’s rise of 18%.
Currently, Morgan Stanley carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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