Gorman’s strategy is to cut in half the capital required to run the fixed-income business by 2016, from $35 billion in the third quarter of 2011 to less than $18 billion. He called that plan “very bold.”
In equities trading, headed by Ted Pick, Morgan Stanley’s revenue fell less than 1 percent from a year earlier to $1.27 billion, excluding DVA. That was a 4 percent increase from the third quarter’s $1.23 billion, and compared with $713 million at Bank of America Corp. and $895 million at JPMorgan. Brad Hintz, an analyst at Sanford C. Bernstein & Co., had estimated revenue of $985 million, while Chen at Credit Suisse estimated $1.2 billion.
Morgan Stanley is eliminating 1,600 jobs from its investment-banking division and support staff, after reducing the number of employees by about 4,200 in the first nine months of 2012. It’s also deferring all bonuses for top earners, which will reduce compensation costs recognized in 2012.
‘Very Comfortable’
Gorman said in today’s interview he’s “very comfortable” with headcount at the firm.
The firm generated $1.23 billion in fourth-quarter revenue from investment banking. That figure, up 39 percent from a year earlier, included $454 million from financial advisory, $237 million from equity underwriting and $534 million from debt underwriting.
The company plans to cut risk-weighted assets within fixed- income and commodities. The firm has already reached its goal for 2013, which was $280 billion, down from $390 billion in the third quarter of 2011, the firm said in a presentation today. Morgan Stanley will continue cutting assets to arrive at less than $200 billion by 2016, according to the presentation.
Asset management reported a pretax gain of $221 million, compared with $78 million in the previous year’s period.
Morgan Stanley was the second-ranked equity underwriter in the quarter, according to data compiled by Bloomberg. It was also the No. 3 adviser on global announced mergers and acquisitions and the fifth-ranked underwriter of U.S. bonds, the data show.