Morgan Stanley culls investment bankers in Asia

Morgan Stanley has let go of around 50 investment bankers across Asia during the past week, as part of the 1,600 jobs that the bank will be cutting worldwide across its institutional securities group.

Some staff were informed late last week, while others found out on Monday and Tuesday amid widespread gossip, which made the process more painful than necessary.

Sources said that around 40 people affected in Asia, excluding Japan, are from the firm’s investment banking division and about 10 are from the global capital markets unit. They include at least 15 managing directors or executive directors, which has to be one of the most significant culls of high-level executives in one fell swoop in Asia in recent months. The firm’s fixed-income and equity sales and trading groups appear to have been less affected in this round of layoffs.

In Asia, the cuts were described by one source as “one or two people across geographies and across sectors”. Another described them as “strategic rather than a wholesale destruction of a department”.

Most of the layoffs are immediate, although sources said some senior bankers will continue to work for another one or two months before actually leaving, suggesting that the full extent of the cutbacks may not be visible externally for a little while.

Worldwide
The global reduction aims to shed 6% of Morgan Stanley’s overall headcount in institutional securities, which includes its sales and trading businesses, investment banking and capital markets, as well as research. The geographic distribution of the lay-offs is broad, with about half the cuts occurring in the US and half internationally.

The 50 positions that have been confirmed are just the lay-offs in investment banking and global capital markets. There are others who have lost their jobs across fixed income and equities sales and trading, research and the infrastructure support groups related to these businesses as well.

The cuts have affected staff across all levels of seniority, but a source said that there has been “an emphasis on more senior employees globally”.

So far, the only department that has been spared is the firm’s global wealth management unit, where financial advisers are not impacted at all.

These cuts are in addition to the 7% global headcount reduction made across the full firm during 2012. As of December 31, Morgan Stanley’s global headcount was approximately 57,000.

The recent round of layoffs could reflect a more stringent approach since Colm Kelleher took over as the sole president of the institutional securities division on January 1. On November 5, Morgan Stanley announced that it would elevate Kelleher, formerly co-head of the unit together with Paul Taubman. The press had made hay about how the two were at best dissimilar, so it seemed inevitable one would ultimately succeed as a sole head. And once that happened, it was also inevitable that he would want to make a mark.

Indeed, in hindsight, re-reading Morgan Stanley’s press release on the promotion it seems like the cuts were being foreshadowed then. Kelleher reports to Gorman who had this to say about Kelleher’s promotion.

“We are intensely focused on improving returns for our shareholders. I am confident that under Colm’s leadership, we will continue to align sales and trading more closely with investment banking and capital markets to drive synergies between these businesses and optimise our ability to grow our revenue base and drive profits.”

Indeed, rival bankers were somewhat surprised at Morgan Stanley’s investment banking performance in 2012. In Asia, the firm has, shall we say, had better years, at least in terms of its performance in league tables.

In 2012, the firm ranked fifth in Asia-Pacific ex-Japan for completed M&A advisory, behind Citi, Credit Suisse, UBS and Goldman Sachs, according to Dealogic. It was fourth in the ECM rankings for Asia-Pacific ex-Japan, behind Citi, Goldman Sachs and UBS. It was eighth in the Asia-Pacific ex-Japan G3 bond bookrunner rankings for 2012, behind Barclays, Standard Chartered, Deutsche Bank, Goldman Sachs, Citi, J.P. Morgan and HSBC.

Morgan Stanley is due to announce its fourth-quarter earnings on Friday, January 18.