The persistent slowdown in the investment banking (IB) business has led Morgan Stanley MS to consider cutting around 7% of jobs in the Asia-Pacific region (excluding Japan), per the persons familiar with the matter. This is part of the broader 3,000 IB job cuts the company announced recently. The development was first reported by Bloomberg News.
Of the total cuts, China is likely to take the biggest hit as slowing economic growth in the country is curbing dealmaking. Last year, the company had slashed roughly 50 IB jobs in the Asia-Pacific region, with a large number being China-focused positions.
Amid the challenging economic environment, a slowdown in dealmaking has prompted MS to consider its headcount.
Similar to 2022, the overall IB business performance was weak in the first quarter of 2023. A host of factors, such as geopolitical tensions, inflation, rising interest rates and fears of a global recession, acted as headwinds for mergers and acquisitions. Thus, deal volume and total deal value numbers crashed in the quarter. For the same reasons, IPOs, follow-up equity issuances and bond issuances dried up.
Due to these headwinds, Morgan Stanley’s equity underwriting fees decreased 22% year over year and fixed-income underwriting declined 6%. Advisory fees were down 32%. So, total IB fees dipped 24% year over year.
The outlook for the Asia-Pacific IB business looks bleak in the near term. The company’s chief finance officer, Sharon Yeshaya, on the first-quarter conference call, said that “expense management” was a priority, given the broader market uncertainty and elevated inflation.
Over the past six months, shares of MS have declined 8.2% compared with the industry’s fall of 17%.
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Currently, Morgan Stanley carries a Zacks Rank #4 (Sell).
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Morgan Stanley is not the only one that is trimming workforce. Many other Wall Street firms, including Bank of America BAC and Citigroup C, have been taking similar steps in their IB and wealth management divisions.
This March, Citigroup initiated a round of job cuts, slashing hundreds of jobs across the firm, which accounted for less than 1% of its total workforce. According to people familiar with the matter, who asked not to be identified, the company’s IB division, its operations and technology organization, and the U.S. mortgage-underwriting division were among those affected.
In its IB division, Citigroup was struggling because of the industry-wide slowdown in dealmaking. In its mortgage division, the company was grappling with reduced mortgage demand because of rising prices and a rapid increase in mortgage rates.
Similarly, in February, it was reported that Bank of America was planning to cut jobs in its investment bank. The cuts are expected to have affected less than 200 bankers globally.
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