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October 3, 2007

Morgan Stanley To Axe 600

by Stewart Douglas

Story link: Morgan Stanley To Axe 600

Morgan Stanley has announced it will be cutting around 600 employees within its mortgage division during the pending management restructure designed to streamline cost centres in the short term.

The investment bank yesterday announced that the bulk of the jobs to be axed would come from its US operation, with just 100 in Europe - of which 90 are UK based.  The New York trading and securities branch will remain unscathed by the job cuts, which are designed to reflect unprofitable lending operations in the wake of current global market turmoil.

The move is just the latest in a raft of measures designed to reflect the less favourable lending market conditions, as a result of the fallout from the US sub-prime lending sector and the resultant credit crunch environment.

Credit Suisse lost 170 employees in its investment banking operation, whilst Lehman Brothers slimmed down significantly in their mortgage operation, losing 2,500 staff from there.  More job losses across the major Wall Street banks are expected over the coming weeks.

Morgan Stanley has also announced that its mortgage operation will be centralised in Irving, Texas, which will necessitate the closure of many of the regional divisions operative at present, and could see yet further job losses to accommodate the new unitary set-up.

Morgan Stanley in particular has felt the full brunt of the sub-prime sector problems, with extensive exposure to risky assets within that market.  Having purchased sub-prime lender Saxon Capital for around £350m a year ago, Morgan Stanley has realised a tricky investment, and suffered from the inevitable liquidity concerns raised by the sub-prime collapse.

With mortgage and lending markets on the whole taking a nosedive, Morgan Stanley’s slim down looks unlikely to be an isolated incident as banks struggle to regain profitability in mortgage related sectors.

 

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