Two Dozen To Be Fired At Morgan

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The New York Sun

Morgan Stanley, the only major American securities firm to report lower third-quarter earnings, will fire about two dozen senior investment bankers, said a person with direct knowledge of the plans.


As many as 25 managing directors will be told this week they’re no longer needed, said the person, who declined to be identified. The cuts, which affect bankers in offices around the world, mark the biggest shakeup in Morgan Stanley’s investment-banking unit since Walid Chammah, 51, was made global head of the group in August. A Morgan Stanley spokesman, James Badenhausen, declined to comment.


The chief executive, John Mack, attempting to lift net income and the company’s stock price, announced plans to eliminate more than 1,000 brokers in August. The 60-year-old Mr. Mack, who said on Tuesday he plans to double earnings at the New York-based firm in five years, also has eased out board members and executives, including the head of the brokerage for individual investors, John Schaefer, and an asset management chief, Mitchell Merin.


“I’ve said to our managers, ‘we need to manage our business,'” Mr. Mack said in an interview after a Merrill Lynch & Company investor conference in New York on Tuesday. “Everyone looks at the portfolio of people and in looking at that there may be some changes. A lot of it is the year-end process.”


Morgan Stanley, which has more than 1,000 managing directors worldwide, reported an 83% drop in fiscal third-quarter net income, dragged down by $1 billion of costs from the planned sale of an aircraft leasing unit.


Mr. Mack was appointed CEO in June, replacing Philip Purcell who left amid pressure from shareholders. Morgan Stanley’s stock fell 40% during Mr. Purcell’s final five years in the job. Mr. Mack worked at Morgan Stanley from 1972 to 2001. He then ran Credit Suisse First Boston, the securities unit of Zurich-based Credit Suisse Group, for about three years until mid-2004.


In remarks to investors at the Merrill conference, Mr. Mack called for improvements to “almost every” businesses. “Make no mistake, our performance has lagged the industry,” he said.


Mr. Mack named a former debt capital markets banker, Mr. Chammah, to run investment banking, including mergers and acquisitions. Mr. Chammah replaced Cordell Spencer and Michael Uva, who were appointed by Mr. Purcell five months earlier. Mr. Uva left in September after 20 years at Morgan Stanley.


Stock and bond underwriting accounted for $510 million of Morgan Stanley’s investment-banking revenue in the third quarter, up 27% from a year earlier. Fees from mergers and acquisitions increased 25% to $388 million.


Morgan Stanley ranks second behind Goldman Sachs among M&A advisers, with a 25% market share, according to data compiled by Bloomberg. The firm ranks no. 3 among global equity underwriters after New York-based Citigroup and Goldman Sachs.


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