Morgan Stanley (NYSE:MS) announced that it plans to cut its stock-trading staff by 5%, as part of its year-end exercise to reduce surplus workers. On Friday, Morgan Stanley stock fell 3.37%, which ended at $31.29, and has fallen 5.63% since the start of December. The market's reaction to the job cuts has been unfavorable, because profitability levels have not changed much since the job cut spree started. After the market closed yesterday, the stock fell a further by 1.02% in after-market trading.
The decision may help reduce salary expenses but has also affected morale. Morgan Stanley’s equity-trading department was able to boost revenue by 19% to $6.31 billion for the first nine months this year, the biggest gain by any major global bank. During the last three months, the stock has declined 4.93%, compared to the S&P500, which rose 2.6% during the same time period.
Morgan Stanley says the decision was taken to improve performance. This decision is not linked with the bank’s decision to cut 25% of its bond-trading staff in November.
Morgan Stanley rival Goldman Sachs (NYSE:GS) is also expected to cut the same percent of employees at the start of next year. But at the start of November, Goldman took major steps to revamp its training program for its new hires.
Executives at both banks are looking for ways to trim costs in any way possible. Steps taken by the banks to cut costs include contracting the retail business, and improving efficiency by developing better software.