The bond and commodities trading business brought in $US873 million in the first quarter, excluding accounting adjustments. Photo: John Taggart
Morgan Stanley's fixed-income and commodities business is capable of generating $US4 billion in annual revenue after the firm cut the operation in recent years amid an industrywide slump, chief executive officer James Gorman said.
Revenue from the unit in the second half of last year was "unacceptable" and well below the roughly $US1 billion needed every quarter to meet the potential of the business, Gorman said Tuesday at an investor conference Morgan Stanley sponsored in New York. The firm has finished eliminating jobs in fixed income and is now "rebuilding morale", said Gorman, 57.
Unlike many of his peers atop the nation's other big banks, Gorman moved aggressively to reduce Morgan Stanley's fixed-income operations as the revenue pool for the industry tumbled. The firm in December said it would cut 25 per cent of its fixed-income staff, including 470 traders and salespeople. The bank said Tuesday it expects to save $US100 million by moving 1250 support staff to lower-cost locations.
The bond and commodities trading business brought in $US873 million in the first quarter, excluding accounting adjustments. That was up from $US550 million in the fourth quarter and $US583 million in the third.
Morgan Stanley agreed to sell its oil-merchanting business to Castleton Commodities International LLC last year for a price said at the time to top $US1 billion, marking a milestone in its multiyear effort to reshape its commodities unit amid new capital rules and regulatory scrutiny.
