Morgan Stanley will cut about 2% of its global workforce, or about 1,600 people, joining Goldman Sachs, Citgroup and Barclays in reinstating an annual cull of underperformers that had been put on hold by a pandemic-era boom in dealmaking.

Key Takeaways

  • Morgan Stanley is cutting about 1,600 of underperforming employees.
  • Rising interest rates have slowed dealmaking.
  • Investment banker bonuses could drop as much as 30%.

“Some people are going to be let go,” Morgan Stanley CEO James Gorman told Reuters last week. “In most businesses, that’s what you do after many years of growth.”

Investment banking revenue across the top five US banks slid 47% in the first nine months of 2022 as rising interest rates scuppered deals. In the third quarter, deal values dropped 64% and volume slipped 36%, compared with the same period a year earlier.

Job cuts are coming amid expectations that investment banker bonuses will drop by as much as 30%. Johnson Associates said in a report last month that bonuses for underwriters could fall by 45%.

“This is going to be a more difficult compensation season, just like it will be for every firm in our industry,” Jefferies Chief Executive Officer Rich Handler and President Brian Friedman told employees this week,

Morgan Stanley’s headcount swelled by 34% to more than 81,000 in the third quarter from the first quarter of 2020.

While the job cuts will happen across almost every corner of the bank, financial advisors are expected to spared because they’re still generating revenue by managing client assets, people with knowledge of the job cuts told CNBC.

Morgan Stanley’s stock has fallen 13% in the last 12 months, in line with an 11% decline in the NYSE Composite.

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