Morning Coffee: Morgan Stanley’s job cuts begin in June and fall heaviest here. 2025 is about revenue growth without hiring
Much in finance seems to happen frictionlessly and almost instantly, so when a bank like Morgan Stanley begins to execute on the reduction in force that Ted Pick announced back in March, it's a reminder that cutting head is more than a matter of calling people into a conference room and giving them a cardboard box to clear their desk. The paperwork needs to be filed.
Get Morning Coffee ☕ in your inbox. Sign up here.
In New York State, that means posting a notice on the state Department of Labour’s “WARN” (Worker Adjustment and Retraining Notification) website. If you search for financial services redundancy notices, you can see exactly how the 2025 reduction in force is going to affect New York-based Morgan Stanley bankers, starting from June.
There are going to be 230 redundancies in New York (versus a global total of about 2,000). Only 84 of the jobs being cut in New York are at the bank's global headquarters building at 1585 Broadway. Another 90 jobs are going in the old headquarters at 750 7th Avenue, and another 47 are going in the 1633 Broadway building. The geographical pattern strongly suggests that the losses are being targeted on mid- and back-office roles rather than the front office.
It’s also very noticeable that there are no WARN postings at all related to the Wealth Management headquarters in Westchester. When the original announcement was made, it was emphasized that wealth managers would not be part of the exercise. It seems that the entire franchise may be going through untouched.
In any case, according to the filings, the period in which the redundancies are going to happen begins on 17 June, and could carry on until the end of February next year (but probably won’t). For what it’s worth, a law firm has announced that it’s “investigating potential legal claims” including “wrongful termination, discrimination, retaliation, and possible violations of the Worker Adjustment and Retraining Notification (WARN) Act”, and that if any bankers believe their rights have been violated, there are some enthusiastic lawyers hunting for business.
This might be as much help as anyone’s going to get – the hiring environment that they’re being released into is pretty bad, and the regulatory filings remind us that “employees are not represented by a union”. Good luck to everyone affected, in what feels like it’s unlikely to be the last set of notices troubling the New York State Department of Labour website this year.
Elsewhere, “revenue per employee” is usually the best rough-and-ready metric of an investment bank’s performance you’re going to find. Unlike accounting-based measures of returns it isn’t distorted by leverage or business mix, and arguably it pays more respect to the fundamental fact of the industry, that human capital is the most important input. The disadvantage of thinking about banking in those terms, though, is that it can mislead you into believing that the only way to grow revenue is to add more headcount.
Rig Karkhanis, the head of global markets at Nomura, is under no such misconception. He’s planning to grow equity derivatives revenues in Europe from “literally zero” to $100m as a “longer term plan”, which he says “should happen in the next couple of years”. Karkhanis is not the only one planning to generate output without input – Citadel Securities has also demonstrated the possibility after delivering 45% revenue growth in a year with next to no change in headcount.
How can you manage it? Here comes some slightly ominous news. Although Karkhanis plans to be “extremely conservative around our cost management” and keep headcount flat, he says that “That doesn’t mean that we’re not improving the business or investing in the business”. In other words, he might be bringing in the human capital needed to generate nine figures of derivatives trading revenue and paying for it by getting rid of some existing staff. Unfortunately, not all heads are created equal, and not everybody’s human capital is as valuable as everyone else’s.
Meanwhile …
The latest step in UBS’ streamlining operation is to sell its hedge fund business, O’Connor, to Cantor Fitzgerald. No indications of what assurances or lock-ins have been given to the employees (who enjoyed a great deal of independence), but they keep their $11bn of assets under management and apparently will continue to distribute to UBS wealth management clients. (Reuters)
Any Managing Directors who were inconvenienced by the shutdown at Heathrow Airport in March will possibly be further enraged to discover that the airport’s chief executive was asleep with his phone on silent and unable to receive “pls fix” messages. (FT)
The CEO of Anthropic AI believes that “in the next one to five years” his products will wipe out at least half of all entry-level white collar jobs and create 10-20% unemployment. It’s also going to cure cancer and give us 10% economic growth. He’s even volunteering to pay a “token tax” on AI queries to help smooth the pain. (Axios)
The Federal Reserve has disbanded some of its internal teams which had been studying the potential for climate events like floods and wildfires to contribute to financial stability risk. (Bloomberg)
Dmitry Balyasny receives a Hedge Fund Lifetime Achievement Award, in which it’s noted that he’s a great admirer of Ayn Rand (not very unusual in context) and he’s still a major active risk-taker for the multistrategy fund he runs (more unusual). (Institutional Investor)
Brendan Liaw called himself a “stay-at-home son” because he thought it sounded funnier and less depressing than “unemployed and living with parents”. Now that he’s won $60,000 on Jeopardy, he’s become an unlikely role model with a “job” that others envy. (WSJ)
Alexander MacLeod has left banking to follow his dream of being a Harris Tweed weaver. Since the fabric must, by law, be woven on the Isle of Harris, by an islander in their home, it’s not a side-hustle for everyone. (Fashion United)
Have a confidential story, tip, or comment you’d like to share? Contact: +44 7537 182250 (SMS, Whatsapp or voicemail). Telegram: @SarahButcher. Click here to fill in our anonymous form, or email editortips@efinancialcareers.com. Signal also available.
Bear with us if you leave a comment at the bottom of this article: all our comments are moderated by human beings. Sometimes these humans might be asleep, or away from their desks, so it may take a while for your comment to appear. Eventually it will – unless it’s offensive or libellous (in which case it won’t.)
