Morgan Stanley beats forecasts, girds for more cost cuts

Tue Jan 19, 2016 12:55pm EST
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By Richa Naidu, Sudarshan Varadhan and Olivia Oran

(Reuters) - For Morgan Stanley, belt-tightening is becoming a way of life.

The investment bank posted better-than-forecast fourth-quarter results largely thanks to greater cost cutting, including moves to slash 25 percent of its fixed income headcount to adapt to a protracted slump in bond trading.

Now Chief Executive James Gorman is focusing on ways to cut even more deeply, leaning on technology and increased outsourcing to cut another $1 billion in costs this year.

"They’re looking at the environment and have determined that they can’t get enough returns for shareholders through significant increases in banking or massive increases in assets under management," said Ryan Kelley, a portfolio manager at Hennessy Funds and a Morgan Stanley shareholder. "The best way to get there is through continued cost cuts."

Morgan Stanley plans to lean on technology and outsourcing to reach its latest cost-cutting target. Wall Street banks are grappling with regulations discouraging them from risky trades along with concern about China, oil prices, an uncertain interest rate climate and weak IPO activity.

Morgan Stanley's larger rival Goldman Sachs Group Inc (GS.N: Quote), which faces similar issues, is due to report quarterly earnings on Wednesday.

"We enter 2016 with a continued focus on managing expenses across the firm," Gorman said in a statement.

Morgan Stanley's shares edged up 0.3 percent shortly after midday.   Continued...

The corporate logo of financial firm Morgan Stanley is pictured on the company's world headquarters in the Manhattan borough of New York City, January 20, 2015.     REUTERS/Mike Segar