Just after declaring the gloomy second quarter results, Morgan Stanley (NYSE:MS) Chairman and Chief Executive, James Gorman, announced a cut of 7% in the firm’s headcount from 2011. The 7 percent cut will result in reduction of more than 4,000 jobs from the firm’s global headcount of 61,899 at Dec. 31.
Just last winter, Morgan Stanley announced to lay-off some 1600 employees, which was its largest cutback since late 2008 and early 2009. Up till January, it was able to achieve 4 percent to 5 percent of those cuts, and plans to complete another 2 percent to 3 percent by the end of 2012. Slashing staff was seen as a general trend among Wall Street firms since the second half of 2011, amid concerns about the European crisis and slowdown in Asia.
Earlier today, Morgan Stanley reported a 24 percent decline in second-quarter revenue. Total revenues for quarter totaled to $7.0 billion, which falls below the analyst’s estimate of $7.76 billion. Revenues from all three of Morgan Stanley’s main businesses — investment banking, wealth management, and asset management — dropped in the second quarter. Morgan Stanley’s bond trading business, which generally contributes about a fifth of its revenue, also saw a 60 percent decline, excluding accounting adjustments. The bank posted a profit of $564 million, against a loss of $558 million a year earlier.
Apart from macro factors, like companies’ reluctance to issue debt and equity, the European debt crisis, and slow stock and bond trading, Morgan Stanley also has had its own share of difficulties to blame. It received a debt rating downgrade threat from Moody’s Corporation (NYSE:MCO), which suppressed its bond-trading business during the second quarter, also it was widely criticized for the poor handling of the Facebook Inc (NASDAQ:FB) initial public offering, in which we all know what happened. Ultimately the bank received Baa1 rating against the much feared junk.
Commenting about the results, Mr. Gorman said in a statement, “Although global economic uncertainty remains a headwind, we are proactively positioning the firm for success; we continue to be focused on taking the necessary steps to deliver strong returns for our shareholders.”