Morgan Stanley to cut investment banking workforce

Morgan Stanley is planning to initiate significant cuts to its investment-banking workforce in the Asia-Pacific region, targeting around 50 positions, according to individuals familiar with the matter. The reductions are anticipated to primarily impact Hong Kong and China, with more than 80% of the affected roles concentrated in these areas.

These planned cuts represent approximately 13% of the bank’s 400-strong banking staff in the region, excluding Japan. It is expected that over 40 individuals in Hong Kong and mainland China will be affected by the impending layoffs.

While the final scale and timing of the job cuts remain subject to potential adjustments, the reductions are reportedly imminent. A spokesperson for Morgan Stanley declined to comment on the matter.

This downsizing initiative is poised to be the most significant in years for Morgan Stanley in China, its largest market within the region. The move comes amidst economic challenges in the world’s second-largest economy, including a protracted real estate crisis and ongoing growth uncertainties.

Morgan Stanley’s decision to postpone the layoffs late last year, banking on the possibility of voluntary departures amid historically low bonuses for dealmakers, yielded limited results. With revenue from China continuing to decline, the bank has opted for deeper staff reductions.

Against the backdrop of a deal drought and strained US-China relations, global financial institutions are seeking to trim expenses. The decline in stock sales by Chinese firms in the US and Hong Kong further underscores the challenging environment for investment banking activities.

HSBC Holdings Plc has also commenced a fresh round of job cuts, joining other major financial institutions such as UBS Group AG and Bank of America Corp. in reducing their workforce earlier this year. Notably, Goldman Sachs Group Inc., Citigroup Inc., and JPMorgan Chase & Co. have all implemented substantial job cuts in Asia over the past two years.

The downturn in Asia’s investment banking sector has resulted in a significant decrease in pay for senior bankers, with compensation levels plummeting to nearly two-decade lows. At Morgan Stanley, last year saw a 7% reduction in investment-banking headcount in the region, with China-focused bankers bearing the brunt of the cuts, following similar downsizing efforts in 2022.

Despite the workforce reductions, Morgan Stanley remains committed to expanding its presence in China. The bank recently secured approval for principal trading and research licences, in addition to establishing a futures company and acquiring full ownership of its fund management business. Furthermore, the bank has made several key senior hires for its investment banking division in the region this year, aiming to bolster its capabilities and strengthen its market position.