Nov. 12 (Bloomberg) -- Morgan Stanley said it plans to fire 10 percent of its institutional securities staff and 9 percent of the firm's asset-management group as the economy contracts and client demand wanes.

The cuts are in addition to headcount reductions disclosed earlier this year, Chief Financial Officer Colm Kelleher said at a conference in New York hosted by Merrill Lynch & Co. Morgan Stanley also named Wachovia Corp.'s Cece Sutton and Jonathan Witter to lead the company's new retail banking business. The firm will pursue ``targeted acquisitions'' among consumer banks, Co-President James Gorman said.

The firings announced today amount to between 5 percent and 10 percent of Morgan Stanley's 46,383 workers, said a person familiar with the matter, speaking anonymously because the numbers aren't public. The reductions add to the 4,440 people Morgan Stanley has already fired in 2008 and increase to more than 155,000 the number of jobs eliminated by the financial industry worldwide since the middle of last year.

Morgan Stanley and larger rival Goldman Sachs Group Inc. are cutting jobs after opting to convert to deposit-taking banks from securities firms in September, following the bankruptcy of Lehman Brothers Holdings Inc. Goldman and Citigroup Inc. last week began firing workers as part of plans to cut more than 12,000 jobs.

Lehman collapsed amid a crisis of confidence in Wall Street firms that relied on the debt markets for funding. Morgan Stanley last month raised $9 billion from Japan's Mitsubishi UFJ Financial Group Inc. and received $10 billion from the U.S. government.

Assets Shrink

Sutton, 50, will oversee Morgan Stanley's push into commercial banking, the firm said in a statement today. She was in charge of retail and small-business banking at Charlotte, North Carolina-based Wachovia. Witter, 39, will be chief operating officer of Sutton's new group.

Sutton will join Morgan Stanley's management committee and report to co-president James Gorman, the firm said.

New York-based Morgan Stanley shrank total assets to ``significantly'' below $800 billion by the end of October, Kelleher said. The company aims to fund 50 percent of its holdings with equity, long-term debt and deposits.

Documents on the firm's Web site that accompanied today's presentations show that 33 percent of the firm's assets are funded with equity, long-term debt and deposits, up from 21 percent in 2007. Total assets have dropped to below $800 billion from $987 billion in the fiscal third quarter as the firm reduces its leverage.

Courting Deposits

Kelleher said he expects lower leverage to shave 3 to 5 percentage points from the firm's normalized return on equity and that in the ``very near term'' returns will be ``very challenged.''

The slides today also said the firm's institutional securities business, which includes investment banking and trading, plans to ``re-size cost base and headcount to match current opportunities.''

The areas that the division plans to ``reshape'' include prime brokerage, proprietary trading, principal investments and commercial real estate origination. The areas that the firm plans to ``maintain'' or ``grow'' include cash trading, equity derivatives, foreign exchange, rates, commodities, corporate credit, mergers and acquisitions and capital raising, according to the slides.

The company said Oct. 29 that it's using its 8,500 brokers to help attract deposits and has sold $3 billion in certificates of deposit in four weeks.

Profit fell 41 percent to $3.96 billion in the nine months that ended Aug. 31 and the stock is down 78 percent this year. Morgan Stanley dropped $2.14, or 15.2 percent, to $11.94 today in New York Stock Exchange composite trading.

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net.

Last Updated: November 12, 2008 17:43 EST