Morgan Stanley to Cut Jobs in Asia

Morgan Stanley (MS - Analyst Report) has announced its plans to reduce its Asian workforce by 15%. As per Bloomberg, the company plans to lay off employees in its Asian Investment banking division.

The job cuts will mainly impact country bankers and personnel in the mergers and acquisitions and global capital market units in the Asia-Pacific region, excluding Japan. It is anticipated that the Asia-Pacific head of oil and gas on the investment-banking team and the managing director for real estate with focus on China are most likely to be terminated.

These layoffs follow the company’s last week’s decision to retrench 1,600 workers in its Institutional Securities segment. This will represent about 6% of the segment’s total workforce. Notably, nearly 50% of the reduction will occur in the U.S.

However, the 16,800 financial advisers of the Morgan Stanley Wealth Management unit are likely to remain unaffected as this division is a more stable source of revenue for the company. These job cuts are over and above about 4,000 retrenchments that Morgan Stanley did last year.

The job cuts do not come as a surprise since many other global institutions have been doing the same over the last few years. Market instability and weakening revenue sources have prompted the company to take this decision in order to control the spiraling costs and improve profitability amid revenue headwinds due to a weak economic recovery and stricter capital requirements.

Other companies that have resorted to job eliminations over the past several quarters include Citigroup Inc. (C - Analyst Report), Credit Suisse Group (CS - Snapshot Report), Deutsche Bank AG (DB - Snapshot Report) and UBS AG (UBS - Analyst Report).

Morgan Stanley is scheduled to announce its fourth-quarter results on Jan 18. The Zacks Consensus Estimate for the quarter is 29 cents per share on revenue expectation of $7,283 million.

The earnings ESP (expected surprise prediction) – the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate – for the company is negative 20.69% for the fourth quarter. This, along with its Zacks Rank #3 (Hold), indicates that the company is likely to miss the Zacks Consensus Estimate.

Presently, we maintain a long-term Neutral recommendation on the stock.