Morgan Stanley to cut 300 jobs amid slowdown
NEW YORK (Reuters) - Morgan Stanley (MS.N) is cutting about 300 jobs in its institutional securities division, mostly in mortgages, fixed-income trading and other businesses hardest hit by the recent market turmoil, a person familiar with the situation said on Wednesday.
About two-thirds of the cuts will take place in the United States, about a third in Europe, and a handful in Asia, the source said. Most of the pain will be felt among desks that trade credit, mortgages and securitized products, including collateralized debt obligations, the source said.
A small number of the cuts will involve investment banking and equities. Some people terminated are senior employees and managing director-level executives, the person said.
One casualty is David Warren, who had been global head of structured credit trading until about a month ago, when he was replaced by Matthew Zola.
Morgan Stanley declined to comment on Warren or the number of cuts, as many people were still being notified of their fates as of Wednesday. Actual departures may stretch on through November, the end of the bank's fiscal year.
"As part of our year-end process, we are selectively re-sizing some of our businesses to reflect current market conditions, as well as reallocating resources to those regions outside the U.S. where we see the best potential for growth," Morgan Stanley spokeswoman Jeanmarie McFadden said.
Morgan Stanley has nearly 48,000 employees, though it refuses to disclose how many work in institutional securities.
CRUNCH TIME
A meltdown in U.S. subprime mortgages this year sparked a broader credit crunch, leading to a sharp slowdown in asset backed securities, leveraged finance and other related businesses. Wall Street is responding by paring down staff.
UBS (UBSN.VX) said it would fire 1,500 fixed income staffers after recording $3.4 billion in write-downs earlier this month. Credit Suisse Group (CSGN.VX) at the end of September fired 170 people from its investment banking division, with many cuts in fixed-income.
JPMorgan Chase (JPM.N) said last week it was cutting less than 10 percent of the staff in structured credit and leveraged finance.
"This is the typical Wall Street approach: they hire rapidly when things are good and fire rapidly when they're not doing well," said Adam Zoia, managing partner at New York-based search firm Glocap Partners LLC.
In this case, though, Wall Street banks are having one of their best years ever, outside of a few key businesses.
The job cutting began a few months ago in the area closest to the mortgage troubles -- loan origination and servicing -- and later spread to leveraged finance and structured products such as CDOs. The result is the ax will fall hard but only on a few business lines.
"Cuts are not across the board, but in areas that have been specifically, negatively affected by the credit crunch," Zoia said.
Morgan Stanley said last month it would slash 600 jobs in its residential mortgage lending business, as demand for loans slumped. Likewise Lehman Brothers Holdings Inc LEH.N, which had been the most aggressive in expanding its mortgage operations, has announced 2,450 mortgage job cuts this year.
Bear Stearns Cos BSC.N said in October it would cut 310 loan origination jobs, in addition to 240 announced in August.
Wall Street banks routinely cull hundreds of bankers and traders each year, though this year's reduction is greater than in past years. Morgan Stanley under newly appointed Chief Executive John Mack fired 25 investment bank managing directors in November 2005, part of a broader shake-up at the firm.
Morgan Stanley disappointed investors with its third-quarter results last month, as nearly $1 billion in credit write-downs and weaker debt trading results dragged down profits. Total banking and trading revenue rose 2 percent to $5 billion, fueled by $1.4 billion of banking and equities trading fees.
But fixed-income sales and trading revenue fell 3 percent to $2.2 billion amid wider spreads, higher volatility and a lack of liquidity that depressed debt issuance, securitization activity and trading results.
