Morgan Stanley to cut up to 25 percent of fixed-income jobs

A pioneer in exploring the Chinese market, the global leading investment bank still regards China as a major impetus for its worldwide business.

The company could cut as much as 25% of the workforce in the business, said people familiar with the decision on Monday. Its return on equity has languished below the 10% mark for long, much to the concern of many investors.

Out of 15 analysts covering Morgan Stanley (NYSE:MS), 9 rate it “Buy”, 0 “Sell”, while 6 “Hold”.

A latest Morgan Stanley report said China’s reforms and opening up policies, especially those in tertiary sector, will generate more business opportunities in health care, internet and technologies.

Morgan Stanley (NYSE:MS) has declined 7.40% since April 28, 2015 and is downtrending. “The last three years it’s been $100 billion or less”.

The move comes during a yearslong effort at Morgan Stanley to increase returns on fixed income, currencies and commodities trading, or FICC, a field that has recently seen abysmal profits throughout Wall Street. Logistically, these job cuts will see a full exit from no less than ten countries, including Argentina, Chile, Mexico, Uruguay, Peru, Denmark, Finland, Norway, Malta and New Zealand.

Stiffer capital rules, a slump in client transactions and a shift toward electronic trading have crimped margins in key fixed-income markets, pushing banks to pull back and eliminate staff. Kelleher said a year ago that the new supplementary leverage ratio made banks unable to earn sufficient returns in some interest-rate trading businesses.

Executives in the banks have been forced to consider cutting further as the market continues to shrink.

Trimming costs, either from smaller bonuses or fewer employees, could help boost returns.

The head of Morgan Stanley maintained his positive outlook on the Chinese economy despite a continued slowdown amid lackluster domestic demand and rising external uncertainties.

“The trick for us is to size our business appropriately to what we think the fee pool is”, he said. In the third-quarter earnings report for fiscal 2015 (3QFY15), the investment bank reported a decline of 42% year-over year (YoY) in its bond’s trading revenue at$583 million from $997 million YoY.