) became the latest Wall Street biggie to announce job cuts.
Starting this week, it is planning to retrench 1,600 workers.
However, the news does not come as a surprise since many other
global banks have been doing the same over the last few years.
The market instability and weakening revenue sources prompted the
company to take this decision for reducing costs.
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The job elimination will take place in Morgan Stanley's
Institutional Securities segment. This will represent about 6% of
the segment's total workforce. Notably, nearly 50% of the
reduction will be made in the U.S.
Employees at all levels - sales persons, traders and investment
bankers - are about to receive pink slips. Also, support staff in
areas such as technology will be in the danger zone. Senior
employees, who receive high compensation, are likely to be
targeted the most.
However, the 16,800 financial advisers of the Morgan Stanley
Wealth Management unit are likely to remain unaffected as this
division is a more stable source of revenue for the company than
the volatile trading and banking operations.
These job cuts are over and above about 4,000 retrenchments that
Morgan Stanley did last year. Such a step by the company could be
viewed as an effort to save its own skin. It reflects Morgan
Stanley's attempts to improve profitability amid revenue
headwinds due to a weak economic recovery and stricter capital
Moreover, Morgan Stanley has been significantly lowering its
fixed income and commodities risk weighted assets (RWAs) since
2009. The company continues to restructure its fixed income
businesses by doing away with complex structured product
businesses. It anticipates fixed income RWAs to be about 25%
lower than that of the third quarter of 2011 (about $347 billion)
by 2013 and 30% below by the end of 2014.
Notably, Morgan Stanley is not the only global institution
rendering so many jobless. Over the past several months,
companies such as
Credit Suisse Group
Deutsche Bank AG
) have outlined plans to slash workforce.
Morgan Stanley is expected to announce its fourth-quarter results
on January 14. The Zacks Consensus Estimate for the quarter is 31
cents per share. Earnings ESP (Expected Surprise Prediction), the
percentage difference between the most accurate estimate and the
Zacks Consensus Estimate, for Morgan Stanley is -25.81%. This
reflects that the company will likely miss the Zacks Consensus
Estimate in the fourth quarter.
Currently, Morgan Stanley retains a Zacks Rank #3, which
translates into a short-term Hold rating. Also, considering the
fundamentals, we maintain a long term 'Neutral' recommendation on