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Saturday, January 23, 2021

Morgan Stanley targets $4 billion annually from fixed income

Morgan Stanley is targeting $4 billion in annual revenue from its fixed-income and commodities business after cutting the operation in recent years amid an industrywide slump.

Third- and fourth-quarter revenue from the unit was “unacceptable” and well below the $1 billion needed to meet that goal, Chief Executive Officer James 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 percent of its fixed-income staff, including 470 traders and salespeople. The bank said Tuesday it expects to save $100 million by moving 1,250 support staff to lower-cost locations.

The bond and commodities trading business brought in $873 million in the first quarter, excluding accounting adjustments. That was up from $550 million in the fourth quarter and $583 million in the third.

Morgan Stanley agreed to sell its oil-merchanting business to Castleton Commodities International last year for a price said at the time to top $1 billion, marking a milestone in its multiyear effort to reshape its commodities unit amid new capital rules and regulatory scrutiny.

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