Morgan Stanley will cut around 1,600 jobs from its 62,600-strong workforce in the first quarter of 2012 in the face of financial market instability.
The banking sector is reigning in on its employee numbers across the board, with Citigroup planning to cut 4,500 jobs, Bank of America set to axe 30,000 jobs over the coming years, and Swiss lender UBS planning on letting 2,000 of its 18,000-strong workforce go.
In total, major banks worldwide have announced plans to shed 125,000 employees this year.
Morgan Stanley shares climbed 28 cents from $15.06, having plummeted almost 45% so far in 2011. The cuts will span all levels and locations, including trading, back office, and investment banking.
The financial services firm did not take on staff in numbers as great as its rivals in the short-lived market rebound of 2009. It has looked to cut expenses in other areas including travel expenses, Blackberry use, and data services.
Morgan Stanley looks set to report a fourth-quarter loss, likely to earn 15 cents per share in the quarter, compared with over 40 cents a share in the same period in 2010. The company is also to shed 80 back-office employees in Singapore as part of a streamlining strategy. The company is offering to relocate staff members to other countries including Hungary and India.
Morgan Stanley Drops MBIA Insurance Claims
Morgan Stanley has agreed to drop insurance claims against holding company MBIA for over $1 billion bringing to an end two years of legal proceedings over mortgage bond guarantees. The company will be able to boost its capital levels and to cut down on risk-laden assets thanks to the deal.
Morgan Stanley had entered into credit-default swaps (CDS) with MBIA to shield itself from mortgage bond losses. Backed into a corner by the financial crisis, the bond insurer divided into a structured finance business and municipal guarantee unit.
Morgan Stanley, along with 17 other banks, challenged the restructuring, which they saw as a threat to MBIA’s ability to pay up on structured finance agreements. The new settlement sees Morgan Stanley drop its objections to MBIA’s restructuring and the latter give up its case concerning the quality of the bonds in question in the CDS contracts.
Out of the 18 banks to object to the MBIA restructuring, 13 have reached settlements. HSBC, Wells Fargo, and Royal Bank of Scotland are among the banks to settle. UBS AG and America Corp are among those continuing with their claims against MBIA.
Following the announcement of the MBIA-Morgan Stanley settlement, the former rose more than 0.5% and though the latter fell almost 1.5% to just over $15.15, it had reached close to $17 the day before. The agreement also makes $5 billion worth of capital available for Morgan Stanley.
Key Statistics - Securities Controls In the US (source: SEC)
- Investors hold nearly $2.8 trillion of US municipal debt.
- In 2011, the US Securities and Exchange Commission filed 735 enforcement actions, an 8.6% increase from 2010, representing more cases it has ever filed before in one year.
- Some 85% of the enforcement actions filed in 2011 were designated National Priority Cases – which are situations that have high impact – an increase of 80 percent from 2010.
- In the past last two fiscal years, the SEC hand out more than $3.6 billion in disgorgement and penalties to investors.