Morgan Stanley (NYSE:MS) is reportedly planning to eliminate 3,000 additional jobs in the second quarter following the first round of 2% layoffs in December 2022. The news comes at a time when the investment bank is facing a continued slump in dealmaking due to macro challenges. Moreover, like other banks, Morgan Stanley is also reducing costs to navigate tough business conditions.
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Bloomberg estimates that excluding financial advisers in Morgan Stanley’s wealth management division and their supporting staff, the latest round of job cuts represents about 5% of the company’s worldwide headcount of over 82,200 employees. While the wealth management team would be spared in this round of layoffs, the investment banking and trading divisions are expected to be hit the most. Earlier this year, rival Goldman Sachs (NYSE:GS) announced its plans to remove 3,200 employees.
Morgan Stanley’s first-quarter revenue fell 2% to $14.5 billion, as the strength in the performance of its wealth management business was more than offset by a 24% decline in investment banking revenue to $1.2 billion. Within investment banking, merger and acquisitions advisory revenue fell 32% and equity and fixed-income underwriting revenues declined about 22% and 6%, respectively.
High interest rates and fears of an economic downturn have resulted in fewer mergers and acquisitions and a decline in initial public offerings (IPOs). Additionally, the recent banking crisis has further impacted investor sentiment.
During the Q1 earnings call, Morgan Stanley’s Chairman and CEO James Gorman cautioned that underwriting and mergers and acquisitions “remain very subdued.” That said, he expects a recovery in the second half of 2023 or in 2024.
What is the Price Target for Morgan Stanley Stock?
Wall Street is cautiously optimistic about Morgan Stanley, with a Moderate Buy consensus rating based on 10 Buys, four Holds, and two Sells. The average price target of $98.53 suggests 12% upside potential. Shares have risen over 4% year-to-date.
