Morgan Stanley plans to close 2011 with 1,600 layoffs

In last of 2011 layoffs, Wall Street major Morgan Stanley is all set to slash as many as 1,600 Jobs

It’s not going to be a happy new year for many on Wall Street including 1,600 employees at Morgan Stanley who will lose their jobs in the first quarter.

The firm states that the job cuts represent 2.6% of its 62,648 employees and will affect all staff levels and geographic areas. The firms 17,000 financial advisors are said to be safe for mow. But a company spokesperson added that there will be “some other positions eliminated in wealth management” as part of the total 1,600 layoffs. This is threatened despite the fact that in the third quarter the wealth management unit contributed $10.1 billion to Morgan’s overall revenue of $26.8 billion, and it added $15.5 billion in net new assets in the 3rd quarter alone.

A number of  challenges including revenue contraction, the growing European debt crisis and an overall slowdown in the global economy have been affecting global banks. This has also sent the firm’s shares spiraling down 44% this year. Rival bank Goldman Sachs is also showing similar bleak shares stories.

In the third quarter Morgan’s underwriting revenues went down 29% to $451 million and fixed income underwriting revenues fell 44% to $212 million from last year.

These will be the largest cutback for the company since late 2008 and early 2009, when it laid off more than 2,500 employees in the midst of the financial crisis.

This Thursday Fitch Ratings downgraded Goldman Sachs and Bank of America Corp., among some other banks. The reason cited was “increased challenges the financial markets face.”

Rodrigo Quintanilla, Standard & Poor’s credit analyst, said, “We believe the U.S. banking industry is undergoing its most radical structural change since the Great Depression.”

Jeff Harte, Sandler O’Neill + Partners analyst, said, “Certainly head counts are on the way down.” He also expects to see bank staff levels fall 2% to 3%, back to where they were after the firms stopped cutting staff following the 2008 crisis.

Harte also added that he believe the cuts won’t exceed 3% or so, because “investment-banking backlogs are strong.” He implied that additional revenue still is attainable if lawmakers resolve the European debt crisis and finalize new regulations for the banking industry.

James Dimon had said last October, “We expect to see the head count going down, but no major layoff programs.”

Even at Wells Fargo & Co. the picture is not so good. During the third quarter its staff dropped by 2,800, or 1%.

In an interview last month Chief Administrative Officer Patricia Callahan had said, “This 10% across-the-board thing, it doesn’t stick. Companies can reduce [staff], but then the work piles up. An across-the-board cut is a short-term cost gain; it doesn’t fundamentally improve your economics.”

Source: NV News