By Lauren Tara LaCapra
(Reuters) - Morgan Stanley
The staff reduction pertains to Morgan Stanley's institutional securities unit - which includes sales, trading and investment banking, and whose staff will be reduced 6 percent - as well as related support staff who work in areas like technology, said the sources, who were not authorized to speak publicly about the matter.
Morgan Stanley Chief Executive James Gorman has pledged to reduce costs, and said in July that he planned to reduce overall staff 7 percent in 2012. The new job cuts are in addition to that plan, the sources said.
The cuts represent roughly 6 percent of the securities unit's staff, the sources said. They represent less than 3 percent of Morgan Stanley's entire estimated workforce at year-end, following other staff reductions in 2012.
"This continues the steady drumbeat of negative news from banks," said Greg Cresci, a Wall Street recruiter with New York-based Odyssey Search Partners. "It's hard to tell where the bottom is, given how many banks have made similar announcements."
The staff cuts are notable because, unlike its chief rival Goldman Sachs Group Inc
For the last two years, trading and investment banking volumes have been on a broad decline, particularly in once-lucrative trading areas. New regulations that ban certain kinds of activity, like proprietary trading, or force banks to hold burdensome amounts of capital, are also prodding banks to exit businesses and reduce staff.
JPMorgan analyst Kian Abouhossein said on Wednesday that he expects Wall Street banks to report a 10 percent decline in revenue for the fourth quarter, compared with the previous period, with double-digit declines in fixed-income and equity trading revenue and a 1 percent uptick in investment banking revenue.
Morgan Stanley's latest job cuts come just a week after Colm Kelleher took full control of the unit on January 1, and add to layoffs across the entire industry that have recently affected tens of thousands of employees.
Morgan Stanley's main rival, Goldman Sachs Group Inc
Bank of America Corp
Banks have largely been cutting staff since the subprime housing crisis began to seize markets in late-2007. There was a brief uptick in hiring in 2009 and 2010, when conditions improved temporarily, but since then there has been an almost steady stream of layoff announcements.
On a net basis, U.S. financial companies including lenders, investment banks, insurers and real-estate firms, have cut 5 percent of their staff, or 50,900 employees since the end of 2007, according to U.S. Department of Labor data. The most recent data available run though November.
"We are seeing a redrawing and restructuring of the industry," said John Challenger, chief executive officer of the employment consulting firm Challenger, Gray & Christmas. "The map continues to be redrawn in terms of regulation, who the competitors are, and the resources banks are willing to commit to the investment banking business."
Although Morgan Stanley's layoffs will affect all staff levels, the likely targets will be more senior employees who take in the biggest paychecks, said one of the sources.
About half of the job cuts will occur in the United States, with the rest affecting international units, said the source.
Morgan Stanley does not regularly disclose the number of employees in its institutional securities business, but it had 57,726 employees worldwide as of September 30. The company is expected to report year-end figures in the coming weeks when it discloses fourth-quarter earnings.
Morgan Stanley shares fell 0.9 percent in afternoon trading to $19.47. Its stock was up 16 percent over the past 52 weeks as of Tuesday's closing price of $19.65, part of a broad rally in financial stocks.
(Reporting By Lauren Tara LaCapra; editing by John Wallace, Theodore d'Afflisio, Dan Grebler and Gunna Dickson)