Morgan Stanley plans to use up to $1bn saved from cutting 4,800 jobs this year to hire top-level executives and bolster its presence in areas such as derivatives, risk management and proprietary trading.
The aggressive hiring campaign is driven by Morgan Stanley’s desire to take advantage of the lay-offs among firms hit by the credit crunch to add expertise in fast-growing businesses and regions such as the Middle East and Asia.
John Mack, chairman and chief executive, has told associates that the turbulence, which has caused 75,000 job losses in the US financial sector, is a historic opportunity to recruit bankers, traders and risk managers.
Morgan Stanley estimates it saved $1bn from this year’s compensation bill by cutting about 10 per cent of its workforce, particularly in areas such as investment banking, fixed income and research, in two waves of lay-offs in January and April.
People close to the company said it had already reinvested $400m of the savings in the salaries and bonuses of new staff.
They added that Morgan Stanley could use the remaining $600m before the end of the
year to lure other recruits but only if it found enough good candidates.
The investment bank is expected to underline its recruitment strategy as early as Thursday with the announcement of several key hires, including Luc Francois, former head of equities at Société Générale, who will become head of European equities and global head of equity derivatives.
Mr Francois left SocGen this year in the wake of the losses caused by the rogue trader Jérôme Kerviel.
He has not been named or involved in either the company’s or the regulators’ probes into the affair.
The moves by Morgan Stanley, which has suffered big trading losses and lapses in risk management, highlight the efforts by financial services groups to position themselves for the end of the credit crunch.
In spite of the stream of writedowns, credit losses and lay-offs, many Wall Street firms say that they are looking to make strategic hires to strengthen their expertise for when the capital markets and economy finally rebound.
Morgan Stanley executives stress that the recruitment drive will not affect the compensation of employees because the funds come from cost savings.
The hires expected to be announced on Thursday point to some of the areas Morgan Stanley wants to improve.
Thomas Wong, a former senior executive at the now defunct Bear Stearns, will take up a new role as head of proprietary trading. Last year, Morgan Stanley had to take a $9.4bn writedown on a disastrous proprietary bet on mortgage securities.
Another former Bear executive, Eric Cole, who was the firm’s head of distressed bond trading, will become co-head of distressed sales, trading and research.
James Brown, a former head of commodities risk management at Merrill Lynch, will become global head of commodities risk, a newly-created post, while Blake O’Dowd will join as head of the restructuring group. He had held a similar position at Lazard.
Morgan Stanley has also been recruiting financial advisors as part of a revamp of its wealth management unit. People close to the bank say it has hired 519 new advisors so far this year, compared with 622 for the whole of last year.
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