(Bloomberg) – Morgan Stanley will take a severance charge of about $150 million in the fourth quarter as the company pares back its fixed-income trading business to improve profitability.
The charge will cover the cost of cutting 1,200 workers worldwide, including about 470 traders and salespeople in its fixed-income and commodities business, according to a person briefed on the matter. That amounts to 25 percent of Morgan Stanley's fixed-income trading staff, with other reductions coming in infrastructure and support roles, said the person, who asked not to be identified because the figures aren't public.
While the financial industry may be reaching the end of a years-long slide in the fixed-income trading business, it's unclear how much revenue it will reliably produce after stabilizing, Colm Kelleher, head of the investment-banking and trading division, said at a Nov. 17 investor conference. Kelleher said the fourth-quarter trading environment wasn't much better than the third quarter, when Morgan Stanleyposted a 42 percent plunge in fixed-income revenue.
The job cuts "will result in businesses that are critically and credibly sized for the current market, while maintaining the ability to deliver for our clients across products and geographies," Kelleher and Ted Pick, who was placed in charge of the trading unit in October, wrote in a memo to employees Tuesday. "It is difficult to see colleagues depart, and we wish them well in their continuing careers."
Capital needs
Bloomberg reported last week that Morgan Stanley planned to eliminate as much as a quarter of the fixed-income staff. The bank plans to provide investors with an update on the business, including targets for its capital needs, when it reports results in January, the person said.
