Morgan Stanley, the renowned banking and trading group, is gearing up for a fresh round of job cuts as it shifts its attention towards cost-cutting measures.
The resurgence of fears surrounding an impending recession has prompted the firm to delay its hopes of a rebound in dealmaking, and senior managers are now reportedly in talks to eliminate approximately 3,000 jobs worldwide by the end of the current quarter.
This would equate to roughly 5% of the company’s staff, excluding financial advisers and related personnel in the wealth management division.
Sources with knowledge of the matter have indicated that the banking and trading group is expected to bear the brunt of these cuts.
When questioned, a spokesperson for Morgan Stanley, which currently employs around 82,000 people globally, declined to comment.
This move comes just a few months after the company downsized by approximately 2% of its workforce.
The overall performance of Wall Street’s major banks has been lackluster in recent times, with declining fees from helping companies with takeovers and raising capital — which can be seen as a proxy for the health of the economy — contributing to the subdued atmosphere.
Additionally, the Federal Reserve’s decision to combat inflation by raising interest rates, coupled with the resulting upheaval in regional banking, has further dampened activity.
According to Chief Executive Officer James Gorman, underwriting and mergers activity have been subdued, and he doesn’t anticipate a rebound until the second half of this year or even 2024.
In the first quarter, Morgan Stanley’s profit dropped from the previous year, primarily due to the slump in dealmaking. Its merger advisory business declined by 32%, while the equity-underwriting business saw a 22% slump.
Analysts predict that revenue from banking fees will be similar to last year’s haul, which was roughly half the $10.3 billion the bank earned during the dealmaking frenzy of 2021.
While the wealth-management unit climbed by 11% compared to the previous year, the institutional securities group’s revenue, which comprises the bankers and traders, fell by 11% in the quarter ending March.
Additionally, the bank’s efficiency ratio, which is a measure of non-interest expense relative to revenue, reached 72% during this period, surpassing its target of keeping it below the 70% mark.
Since the pandemic, job cuts across the finance sector have made a comeback. Initially, banks refrained from cutting jobs to provide their employees with stability. However, as the frenzy subsided, cost-cutting became a priority.
Several banks, including Morgan Stanley, have announced plans to lay off staff. In December, the bank reduced approximately 1,600 jobs, resulting in $133 million in severance costs in the fourth quarter.
In January, Goldman Sachs Group Inc. eliminated about 3,200 positions in one of its most significant cuts ever. Recently, Citigroup Inc.’s CEO Jane Fraser stated that the bank is willing to adjust its staffing levels in its investment bank.