Morgan Stanley is a multinational financial services corporation located in New York City, New York. The company is in the business of global wealth management, institutional securities, and investment management. It was recently announced that the organization will be forced to cut close to 1,200 jobs, about 2 percent of the company’s global workforce. In cutting such a large amount of workers, Morgan Stanley will end up with a severance charge of close to $150 million. These layoffs are in large part due to regulatory changes and low interest rates.
Why the need to lay off workers
Global bond-trading fell after the 2008 financial crisis. Morgan Stanley went from $160 billion to $100 billion, thus taking a major hit. The company has no other choice than to scale back on the bond-trading business, which will cut about 400 positions. Other cuts will be made across support positions within the company. These cuts will insure that businesses are properly sized for their markets. Staff that was recently hired to work on the fixed income segment of the company are also in the process being laid off. The most recent layoffs began with the company’s credit division. There is no information about how much these layoffs will save the company, but they feel these layoffs were the only option in keeping the company afloat.
Morgan Stanley reports drastic falls
Morgan Stanley has said that macro-economically, there has been a drastic fall in demand, which is mainly due to stable and low interest rates. Back in October, the company reported that they saw a 42 percent decline in earnings, which came from the fixed income, currencies, and commodities business. With such a hit and falling revenue, pressure was placed on Morgan Stanley, by investors, to downsize. Investors played a huge role in the organization’s decision to downsize. It is not just Morgan Stanley who has seen drastic falls. With the fixed income market the way it is, major banks are following suit, and making cuts in the fixed income business portions. Credit Suisse Group, Royal Bank of Scotland, and Nomura Holdings are just a few banks that have made cutbacks, but are leaving the option for rehire open if the market makes a rebound.
Looking at a market rebound
Some investors are actually concerned with Stanley Morgan’s preparedness for fixed income market rebounds. If the market rebounds before it is expected to, then the company will have to play catch up with other players in a healthy, fixed income market. Ted Pick, head of the trading division, has given investors a good vibe due to his keen financial instincts. Pick said that it is difficult to see our colleagues depart, and only wants to wish them well.
Are these layoffs just the beginning of a downsize across the entire company, and will Stanley Morgan continue layoffs into the New Year? It is unfortunate that layoffs occurred so close to the holiday season, but the company believes they will see overall profitability in making these tough decisions, as other parts of their business are doing well.