Morgan Stanley prepares to cut fixed-income staff

Our numbers below assume a cut to FICC staff but if the staff reductions were just in fixed income (bond trading) then the impact would be less.

Investors wanted the firm to reduce its exposure to the volatile business and were concerned about signs that it was planning to stay the course and potentially even expand, the people said.

The reported restructuring isn’t the first time in recent years that Morgan Stanley has turned its attention to bond trading.

The year started well for debt traders at Morgan Stanley, and across Wall Street. In June 2014, Galileo Japan Trust announced that Morgan Stanley and its subsidiaries has ceased to be the substantial holder of the Company. Macquarie Research maintained shares on October 20 with “Neutral” rating. The decision reflects Wall Street’s dimming hopes that the debt markets will spring to life soon, lifting revenue. Hawken covers the financial sector, focusing on stocks such as Evercore Partners Inc, Franklin Resources, and Goldman Sachs Grp. Risk-weighted assets tied to it have tumbled from $392 billion to $ 157 billion over the past four years. The company posted a 42% decrease in fixed-income trading during its third quarter of 2015, reports Business Spectator. Mr. Pick was viewed as someone likely to build the business, as he had done with stock trading, some of the people said. Morgan Stanley is up 0.03% in the last 3-month period. Speaking at the Bank of America Merrill Lynch 2015 Banking and Financial Services conference last month, Colm Kelleher, president of Morgan Stanley’s investment banking and securities businesses said the challenge was figuring out the size of the market.

Revenue from fixed-income, currency and commodities trading, or FICC, is on pace to drop to $65 billion this year at the 10 largest global investment banks, according to industry analytics firm Coalition Ltd. That would be the lowest since the financial crisis and less than half of what those firms produced in 2009.

While the business stream remains to be an important segment, it is worth noting that big banks have been cutting down on their operations. Overall, the firm’s return on equity is expected to be around 9%.

Meanwhile, Morgan Stanley CEO James Gorman has been focusing on equities trading and wealth management as profit drivers for the top 6 USA bank by assets as stricter regulations and capital requirements make it more hard to trade bonds.