Monday 23 April 2018

Morgan Stanley to cut staff by 1,000 ahead of weak global growth

Christina Rexrode

Morgan Stanley expects to reduce payroll by just over 1,000 employees by the end of this year, part of a plan to cut headcount by 7pc as measured from the end of 2011, as it prepares for weak economic growth globally and low trading volume, the investment bank said yesterday.

Morgan Stanley, reporting a 24pc decline in second-quarter revenue, is the latest bank to sound gloomy notes about the economy.

Banks have had to cope with companies' reluctance to issue debt and equity, the European debt crisis, and slow stock and bond trading.

The banks said its revenue fell sharply in the second quarter, dragged down by weak results from its investment banking unit. Its net income missed Wall Street expectations, and its stock dropped sharply.

The bank brought in 24pc less revenue overall, but the decline was especially evident in investment banking, where revenue plunged 37pc.

In that unit, revenue from advising businesses was down by half. Bond and commodities sales and trading was down by nearly 60pc. Stock sales and trading fell nearly 40pc.

In a statement, CEO James Gorman described the April-June period as "an environment marked by investor caution."

Expensive

The bank earned $564m (€460m) for the quarter, a swing from a loss of $558m in the same period last year.

In last year's second quarter, Morgan took big charges so it could cut down on expensive dividend payments to Mitsubishi UFJ Financial Group, a Japanese financial firm that gave the bank a life-sustaining cash infusion in the depths of the 2008 financial crisis.

Earnings came to 29 cents per share, lower than the estimate of 32 cents from analysts surveyed by FactSet, a data provider.

Morgan Stanley stock was down 68 cents, or 4.9pc, to $13.99 in premarket trading. The stock was above $30 as recently as February 2011.

The revenue decline is an unwelcome trend for Morgan Stanley, but one it shares with most of its peers.

Bank of America, Citigroup, JPMorgan Chase and Goldman Sachs all reported lower revenue. Only Wells Fargo reported higher revenue, mostly because it issued more mortgage loans.

Besides Wells Fargo, the five other banks rely heavily on their investment banking units, which can offer spectacular gains in good times but carry more risk in a weak economy and when financial markets are choppy.

The results also underscore why Mr Gorman is so eager to buy up the rest of Morgan Stanley Smith Barney, the retail brokerage that Morgan Stanley owns with Citigroup.

Morgan Stanley wants to raise its stake to 65pc from 51pc and is haggling over a price with Citi.

Irish Independent

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