On Tuesday, Reuters reported that Morgan Stanley (MS) has initiated job cuts for about 200 staff members who were involved in providing support services, which included marketing, product support in brokerage offices and others. Alongside, the company has also been shutting down redundant office units, downsizing its number of branches to 120 from 136 units.
These job cuts and office consolidation were part of the integration process that was due post the Smith Barney acquisition from Citigroup Inc. (C) in May 2009. Since the formation of Morgan Stanley Smith Barney, thousands of brokers from Smith Barney are reported to have quit jobs to join rival or independent firms.
However, on May 27, Morgan Stanley Private Wealth Management, a wing of Morgan Stanley, also announced the hiring of 50 private bankers and 35 new securities sales and trading staff. Additionally, the company appointed a team of four investment professionals in order to expand its service offerings to its ultra-high net worth clients in the U.S, Latin America, Europe, Middle East and Asia.
Morgan Stanley’s move of restructuring its personnel resources reflects the strategic step of increasing its cost-efficiencies and operating leverage. This when coupled with the company’s strong liquidity and cash flow reserves, can further help mitigate the financial risks of the firm.
However, we also believe that initiating an efficiency-generating restructuring process is crucial for Morgan Stanley’s sustainability in the current sluggish business environment. This is due to the fact that the company has been experiencing intense pricing competition in some of its businesses in recent years.
Moreover, as of March 2010, Morgan Stanley has reportedly slipped to third position in globally announced and completed M&As, taking a beating from prime rivals Goldman Sachs Group (GS) (#1) and Credit Suisse (CS) (#2). Thus, competitive pressures are likely to affect future growth prospects as its peers seek to obtain market share by reducing costs and prices. Hence, we consider this expense overhaul reform post the Smith Barney acquisition as a significant measure for the company.
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