Morgan Stanley to Axe Jobs in NY - Analyst Blog


According to a state filing, Morgan Stanley ( MS ) intends to lay off 580 workers in New York State due to economic reasons. The company started trimming its workforce since the middle of December on a rolling basis, abide by the Worker Adjustment and Retraining Notification (WARN).

The State Department of Labor made The New York State Workers Adjustment and Retraining Notification Act, also known as the WARN Act, effective on February 1, 2009. Under the provisions of the law, New York-based companies having 50 or more workers in New York State are required to give 90 days notice to the State if they are planning to reduce local workforce. Further, the law requires prior notices for plant closing, large layoff, relocation, or reduction in working hours.

Morgan Stanley's New York layoffs represent the part of retrenchment of 1,600 workers or about 2.6% of total workforce as of September 30, 2011, which was announced earlier this month.The process of slashing workforce by the company is expected to be completed by the first quarter of 2012.

According to a company spokesman Mark Lake, the job elimination will take place in all divisions globally and employees at all levels (analyst, associate, vice president, executive director and managing director) will be affected.

After witnessing a similar trend at many other mega banks along with theEurozone crisis, the layoff announcement does not come as a surprise. Amid the market instability and weakening revenue sources, the company took this decision to reduce costs in the upcoming year.

Morgan Stanley was one of the victims of the 2007 housing bubble. Its share price has plummeted about 75% since then. Despite taking several precautionary initiatives, the company has still not been able to come out of the crisis. Moreover, due to its weak capital position, the company was not granted the Federal Reserve's green signal to raise dividend, following the third round of stress tests early this year.

The job cut announcement by the company could be viewed as an effort to save its own skin. It explains Morgan Stanley's attempt to improve profitability amid revenueheadwinds due to a weak economy and stricter capital requirements by regulators.

Notably, Morgan Stanley is not the only institution rendering so many jobless. Among other U.S. banks, earlier this year, Citigroup Inc. ( C ), Bank of America Corp. ( BAC">BAC ), Wells Fargo & Company ( WFC">WFC ) and The Goldman Sachs Group Inc. ( GS">GS ) outlined their plans to cut hundreds of jobs.

Earlier this month, Citigroup announced its plan to eliminate 4,500 jobs, or about 1.5% of its global workforce over the next few quarters. Similarly, in September,BofA confirmed its plan to retrench about 30,000 workers under the first phase of its ongoing cost-cutting initiative. This will reduceBofA's work force by about 10%.

So, the layoff story has accelerated, spreading panic within the corporate clan. Realistically speaking, until there is an evident revival in revenue generation, a hideous cost-to-income ratio will force many more banks to reduce costs through job cuts to maximize profits and boost capital ratios. Now that the industry leaders have taken their ruthless stand, we wonder what job cut schemes the other weakly performing firms might have in store.

Morgan Stanley currently retains itsZacks #5 Rank, which translates into a short-term Strong Sell rating. Also, considering the fundamentals, we are maintaining ourUnderperform rating on the stock.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: BAC , C , GS , MS , WFC

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