Why All the Layoffs, Morgan Stanley and Friends?

Adding more numbers to the plan, Morgan Stanley (NYSE:MS) is just another one in the crowd of banks performing layoffs in the tens of thousands. A few areas of banking seem to be the most widely targeted for these job cuts.

What’s motivating the job cuts?

There are several reasons for the jobs cuts that have shown up with many of the major banks. One common reason is that banks want to reduce annual expenses or reach annual cost-savings targets. Another reason is that some banks find it necessary to restructure the industry as weaker banking areas or areas crippled by new regulations hinder the banks. Some banks also find reason for layoffs in business that requires more capital.

What areas of banking will be most affected?

As mentioned previously, areas that have weakened or slowed and thus have limited returns will likely be hit with layoffs, as well as areas that require significant capital investment. More specifically, layoffs will likely be seen in the following areas: securities, securitization of mortgages, proprietary trading, bond trading — specifically at Swiss bank UBS AG (NYSE:UBS) — and fixed-income trading, though Morgan Stanley wants to increase its market share in fixed income, currency, and commodities trading…

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The numbers

Morgan Stanley has planned to cut 1,600 jobs, and this number comes on top of prior plans to cut 7 percent of overall staff in 2012. Trying to reduce annual expenses by nearly $2 billion, Goldman Sachs cut 700 jobs last year. Both trying to save about $1.1 billion, Citigroup (NYSE:C) and Credit Suisse Group AG (NYSE:CS) are planning to make significant layoffs, with Citigroup looking at 11,000 job cuts. Topping most others, Bank of America (NYSE:BAC) has been working on 30,000 job cuts from 2011 in a plan to cut annual expenses by $5 billion. Altogether, more than 100,000 job cuts were detailed by U.S. financial firms in the past 2 years.

While Morgan Stanley’s layoffs may not be the largest of the banks mentioned, its continued interest in trimming the excesses that don’t benefit the bank as strongly is representative of the struggle many banks are facing in the current economic and regulatory environment.

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