Morgan Stanley Cuts 2% of Global Work Force as Deal-Making Slows

The investment bank Morgan Stanley is laying off about 2 percent of its global work force as deal-making grinds to a halt, two people with knowledge of the situation said.

The layoffs will affect about 1,600 of its roughly 82,000 workers across all divisions, one of the people said. The people requested anonymity because they were not authorized to speak publicly about the layoffs.

Like other investment banks, Morgan Stanley had paused layoffs during the pandemic, as deal activity spiked industrywide and banks raced to find employees to handle the workload. But jitters in the global economy, alongside a steep slowdown in deal-making, have forced investment banks to once again prune their work forces.

“Some people are going to be let go,” Morgan Stanley’s chief executive, James Gorman, told Reuters last week. “We’re making some modest cuts all over the globe. In most businesses, that’s what you do after many years of growth.”

In the third quarter of this year, there were about 2,273 U.S. deals worth $289 billion, a 64 percent decrease in deal value and 36 percent drop in deal volume from the same quarter a year prior, according to EY, a consulting firm.

As interest rates have jumped, part of the challenge for deal makers has been limited appetite for the kinds of loans typically used to finance leveraged buyouts, making deals previously struck with lower rates less palatable. That has led to a buildup of loans on banks’ balance sheets that, in turn, has made it harder for them to take on more risk — or do more deals.

One of the largest examples of so-called hung deals, or those that banks can’t sell to other investors, is the roughly $13 billion in debt financing that Morgan Stanley committed to help fund Elon Musk’s acquisition of Twitter.

Morgan Stanley, for its part, has used the pandemic to shift further away from a primary focus on investment banking and toward a presence in fee-based wealth management. Last year, the bank completed its $7 billion purchase of the investment and wealth management firm Eaton Vance shortly after its $13 billion acquisition of E-Trade.

Shares of Morgan Stanley are down 12 percent over the past year, giving it a market capitalization of $146 billion. Shares of Goldman Sachs are down about 7 percent and JPMorgan Chase, about 18 percent.

Sumber: www.nytimes.com

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