Morgan Stanley is considering possible job cuts in its retail brokerage segment in order to improve profitability. It is also planning to shutter its redundant brokerage offices as a part of this strategy.
Morgan Stanley Smith Barney – a retail venture co-owned by Citigroup, Inc. (C) and Morgan Stanley – faces a major revamp. More than a dozen of the 120 complexes of this brokerage firm are about to be eliminated. A complex refers to a set of branches that share personnel from administrative and other operations.
Further, Morgan Stanley reduced four operating regions of the venture. The exact number of job cuts has not been announced yet. However, around 700 employees across 100 offices are expected to be dismissed.
In order to achieve targeted pre-tax profit margin, the company is focusing on controlling its expenses. These actions act as a prelude to the upcoming abundant restructuring initiatives at Morgan Stanley.
Earlier in 2011, Morgan Stanley announced its plan to retrench 1,600 workers in the first quarter of 2012.The job elimination took place in all divisions globally and affected employees at all levels. However, at that time the 17,000 financial advisers of the Morgan Stanley Smith Barney unit were not in the danger zone.
Morgan Stanley was one of the major victims of the 2007 housing bubble. Its share price has plummeted largely since then. Despite taking several precautionary initiatives, the company is still unable to come out of the crisis. All these restructuring efforts underline its constant struggle to regain pre-crisis glory.
Notably, Morgan Stanley is not the only institution to trim down its workforce. Citigroup, Bank of America Corp. and Goldman Sachs Group Inc. have been taking similar actions.
Dismal economic scenario and a desperate attempt to display better revenue generation will force banks to take cost-control measures very seriously. These measures will give rise to closures of non-core units and layoffs, ultimately resulting in higher unemployment.
Morgan Stanley currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we also maintain a long-term Neutral recommendation on the stock.