Morgan Stanley to Cut 1,000 U.S., U.K. Mortgage Jobs

Morgan Stanley to Cut 1,000 U.S., U.K. Mortgage Jobs

Feb. 13 (Bloomberg) -- Morgan Stanley, the second-biggest U.S. securities firm, will eliminate 1,000 jobs by scaling back its U.S. residential mortgage business and closing the Advantage Home Loans unit in the U.K.

The firm will continue its mortgage-servicing business, Saxon Mortgage Service Inc., and offer loans to retail brokerage clients, New York-based Morgan Stanley said today in a statement.

Banks and brokers have eliminated at least 19,000 jobs in the past six months as they racked up $146 billion of writedowns and credit losses tied to mortgage securities. Morgan Stanley, which reported its first quarterly loss in December, cut 900 jobs in 2007 from areas that offered mortgages, packaged and traded debt securities and provided high-yield loans amid the worst U.S. housing market in 26 years.

``They should have gotten out of it two to three years ago, but they were making too many fees like everyone else in the business,'' said Malcolm Polley, chief investment officer at Stewart Capital Advisors in Indiana, Pennsylvania, who manages $1 billion, including Morgan Stanley shares. ``I would not expect them to be the first ones or to be the last ones to do this.''

Morgan Stanley, the No. 2 securities firm by market value behind Goldman Sachs Group Inc., said last month it would cut 1,000 more jobs in businesses including asset management and retail brokerage and support areas such as technology and administration.

`Continued Dislocation'

``Given the continued dislocation in the mortgage markets, we have restructured our residential mortgage business to ensure we are appropriately positioned for the environment going forward,'' Anthony Meola, chief operating officer of the U.S. residential business, said in the statement.

The bank also plans to cut 40 jobs in its securitization business in Japan, two people with knowledge of the matter said.

Morgan Stanley, which has lost 19 percent of its market value this year, gained 52 cents to $43.23 in composite trading on the New York Stock Exchange at 4:20 p.m.

Morgan Stanley bought Advantage in December 2005, joining banks including New York-based Lehman Brothers Holdings Inc. and Merrill Lynch & Co. to set up units making home loans to U.K. borrowers and packaging then into securities. The bank also bought mortgage lenders in Italy and Russia.

Shunning Debt

Sales of bonds backed by mortgages and other assets fell in Europe or the first time last year as investors shunned all but the safest securities amid losses on subprime mortgages, making it harder for mortgage companies that rely on asset-backed debt to borrow.

GMAC LLC, the former financing unit of General Motors Corp., said in October it will close its U.K. High Street Home Loans unit and cut 200 jobs because of ``unprecedented volatility'' in global credit markets. Paragon Group Cos., a U.K. lender to landlords, has had to cut new loans and raise 287 million pounds ($563 million) through a share sale to cover a funding shortfall and higher credit costs.

``When the mortgage markets shut down you need to be nimble and lay off some of these workers,'' said William Fitzpatrick, who helps manage $1.8 billion at Optique Capital Management and last month sold 300,000 Morgan Stanley shares. ``This is typical of the cycle.''

BLOOMBERG