Morgan Stanley to halt buybacks, eye jobs

By Joseph A. Giannone

NEW YORK (Reuters) - Morgan Stanley (MS.N), which on Wednesday announced a fourth-quarter loss and a $5 billion capital infusion from a China sovereign fund, will suspend stock buybacks and take a close look at its staffing worldwide, Chief Financial Officer Colm Kelleher said in an interview.

"For the time being, I am suspending share repurchases until I review the situation," Kelleher said. "Having said that, this (China deal) puts us in a very strong capital position."

Kelleher said the investment bank had "significant" surplus capital by regulatory standards before its agreement to sell $5 billion in convertible securities to China Investment Corp.

But Morgan Stanley's internal capital allocation models, in good shape on average during the fourth quarter, ended the period at "an economic capital deficit."

The deficit could have been addressed by other measures such as the issuance of hybrid securities.

Morgan Stanley had approached China Investment Corp early this summer and launched talks about various partnerships, Kelleher said. The talks were "not the result" of Morgan's write-downs, he stressed.

With credit markets poised to remain challenging, Kelleher also said that job cuts are possible in some businesses.

"We're in the process of looking at our allocation of resources. We're clearly looking very closely at what resources we need to apply to these businesses," Kelleher said.

In recent months, Morgan Stanley announced 600 jobs cuts in its mortgage businesses, which have been hard hit by rising losses and a lack of investor demand. That was followed by 300 cuts across several hard-hit businesses in its institutional securities division.

Hiring plans as a result are under review, he said.

"We will be reallocating headcount around the world from businesses that don't need it. We'll just see how the dice fall on that one," he said.

(Editing by Gerald E. McCormick and Dave Zimmerman)