Morgan Stanley, one of the largest banks in the world, is reportedly preparing to make significant job cuts in response to a challenging economic environment. The bank is said to be planning to eliminate around 3,000 jobs from its global workforce by the end of the second quarter, which amounts to roughly 5% of staff, according to people familiar with the matter. The reductions are expected to be concentrated in the banking and trading divisions.
This move comes just months after Morgan Stanley trimmed approximately 2% of its workforce, and as Wall Street's largest banks report disappointing first-quarter results, with fees from takeovers and capital raising falling sharply. The banks' financial struggles are considered a proxy for the broader health of the economy. The Federal Reserve's efforts to curb inflation through rate hikes, combined with regional banking instability, have further dampened activity.
Morgan Stanley's CEO, James Gorman, recently commented that mergers and underwriting activity has been subdued, and he doesn't expect a rebound until at least the second half of this year, or possibly 2024. Similarly, Lazard Ltd. CEO Ken Jacobs predicted that the industry's struggles will continue for the rest of the year. In response, Lazard is set to eliminate 10% of its workforce.
The recent job cuts across the finance industry have been triggered by the cooling off of the dealmaking frenzy that occurred during the pandemic, during which banks refrained from cutting staff to retain talent. However, as activity in the sector slows, banks are now looking to cut costs.
In the first quarter of this year, Morgan Stanley's profits fell from a year earlier, with a 32% decline in merger advisory and a 22% slump in its equity-underwriting business. Analysts predict that revenue from banking fees will be similar to last year, which was approximately half of the $10.3 billion earned by the bank during the 2021 dealmaking boom.
Other banks have already made significant job cuts this year, with Goldman Sachs Group Inc. eliminating approximately 3,200 positions in January, and Citigroup Inc.'s CEO Jane Fraser recently indicating that the bank is open to making adjustments to staffing levels in its investment bank.
The job cuts at Morgan Stanley are expected to be implemented by the end of this quarter, as the bank continues to focus on reducing expenses. While the precise details of the job cuts are not yet clear, the move is likely to affect a significant number of employees across the bank's global operations.