Morgan Stanley announced that it would eliminate 2.6% of its work force, approximately 1,600 jobs, by the first quarter of 2012. Jeanmarie McFadden, a Morgan Stanley spokeswoman, said in a statement, “As we conduct our year-end performance management process and evaluate the right size of the franchise for 2012, we anticipate the elimination of approximately 1,600 positions across the firm globally.”
The bank is trying to reduce noncompensation expenses by $1 billion over the next three years. The newest round of reductions at Morgan Stanley is expected to affect all job levels in all divisions, except for the 17,000 financial advisers in the Morgan Stanley Smith Barney unit. James P. Gorman, the chief executive, told analysts that Morgan Stanley would keep paying “those employees who are delivering value.”
According to a report released by Thomas P. DiNapoli, the New York State comptroller, the securities industry in New York City lost around $3 billion in the third quarter. Personal income tax collection in New York City could drop by $200 million next year because of the lower profits in the financial sector. Business and sales tax collection could drop by $100 million a year. Profits at the city’s securities companies are expected to fall short of the $20 billion in profit officials projected for the year.
Many banks have recently announced widespread cost-cutting programs to improve profits. Citigroup announced it would cut 4,500 jobs over the next few months and Bank of America, Goldman Sachs, Credit Suisse and several others have announced thousands of job cuts over the past year. Mr. DiNapoli estimated that another 10,000 securities industry professionals in New York could lose their jobs by the end of 2012. This would bring the total to 32,000 jobs lost since January 2008.
End-of-year layoffs are a common procedure on Wall Street. Underperforming members of struggling divisions are cut and bonuses are adjusted for the remaining staff. Chris Kotowski, a banking analyst with Oppenheimer, said, “There’s no denying that business is dreadful, and banks are trimming back. In an environment like this, people are going to look at everyone on their platform and say, is this person absolutely necessary?” He continued, “Everybody gets lower bonus checks, and some people get a severance package. This is not a Morgan Stanley thing; this is a Wall Street thing.”