Morgan Stanley Says Cost to Continue Even as Goal Reached
Morgan Stanley (MS) isn’t done with its cost-cutting measures even as the firm reached the ratio it hoped to attain when it set a $1.6 billion reduction goal, Chief Financial Officer Ruth Porat said.
The bank’s third-quarter costs were less than 79 percent of its revenue, excluding higher-than-normal litigation expenses, Porat, 55, said today on a conference call. The bank earlier this year set out a goal of cutting annual expenses by $1.6 billion, which implied an expense ratio of 79 percent.
“We’ve achieved it, but we’re only partially the way through executing it,” Porat said. “The math would say that we’re there, but we are continuing to execute on the programs that we identified back at the end of 2012, so we’re feeling very good about our ability to continue to reduce the expense base.”
Chief Executive Officer James Gorman, 55, joined competitors including Goldman Sachs Group Inc. in cutting the share of revenue set aside for compensation, the company’s biggest expense. Firmwide pay costs represented 49 percent of adjusted revenue in the first nine months of the year, down from 52 percent in 2012.
Morgan Stanley has reduced headcount by more than 5,000 since the end of 2011, including 1,700 job cuts at the beginning of this year. The bank also closed some international offices, moving employees to regional centers, and sold its European wealth-management business to Credit Suisse Group AG.
“There is a culture of expense management across the firm that we haven’t seen for a long time,” Gorman said. “Whenever I travel around the world, local offices, sub-business groups, everybody understands the program, everybody understands what we’re doing.”