Topline: After posting strong third-quarter earnings, Wall Street firm Morgan Stanley will reportedly cut around 2% of its workforce—about 1,500 jobs—as part of a year-end streamlining effort spurred by uncertain global growth outlook and a need to manage compensation expenses.
- Included in the cuts: multiple managing directors and executives in sales, trading and research operations (but financial advisors in wealth management are reportedly safe).
- The technology and operations divisions are expected to be hit with the biggest cuts.
- According to CNBC, Morgan Stanley employed roughly 60,000 people worldwide as of September.
- Reuters reported that market volatility, trade wars and a worldwide economic slowdown prompted the layoffs, and most of the affected employees have been informed.
- Morgan Stanley’s shares were down slightly going into Monday’s closing bell.
- A Morgan Stanley spokesperson declined to comment.
What to watch for: Other firms that might announce cuts. Declining trading revenue in recent years has led Wall Street to cut jobs toward the end of the fourth quarter in order to avoid paying out yearly bonuses, reported CNBC.
Crucial quote: “Global trade is going down for the first time in a non-recessionary period since World War II,” said Wilmington Trust chief investment office Tony Roth. While the U.S. Federal Reserve is currently on hold, “there’s a lot more likelihood that other central banks around the world will keep cutting interest rates in response to the global slowdown.”
Key background: Despite Monday’s layoffs, Morgan Stanley posted a strong third quarter in October, with profit and revenue beating analysts’ expectations. According to Bloomberg, in 2015 chief executive James Gorman cut employees from the firm’s fixed-income division and sold off parts of the commodities business in order to reduce head count while gaining market share, an effort that appears to have been successful. Analysts predict Morgan Stanley will end 2019 with 10% more fixed-income revenue over 2015, and its stock gained 25% this year amid a rally in bank shares.
Tangent: In November, the firm placed four traders on leave for allegedly mismarking securities that concealed between $100 million and $140 million in losses.