Morgan Stanley to close UK mortgage arm

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The Independent Online

Morgan Stanley is shutting down its UK mortgage lending arm, Advantage Home Loans, with the loss of 160 jobs.

The plan, announced to the Cheshire-based workforce yesterday, comes as part of another round of restructuring across the global financial giant, which is cutting 1,000 more jobs on top of the 1,300 redundancies it has announced since last October. Morgan Stanley bought Advantage only in December 2005, as it sought new sources of mortgages which its traders could parcel up into more complicated debt instruments and sell on to outside investors.

The credit crisis has put a stop to most of that repackaging work, and Wall Street banks have been scaling back their mortgage sales businesses since the autumn.

"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 Morgan Stanley's US residential business, said.

Advantage sold its home loans only through independent financial advisers and mortgage brokers. Existing customers will continue to receive bills and make their repayments to another Morgan Stanley subsidiary.

The rest of the job cuts announced yesterday are likely to be spread across the divisions that package and trade mortgage-related securities, both in the City of London and, mainly, in the US.

Morgan Stanley has been among the hardest hit by the credit crisis, reporting $9.4bn (£4.8bn) of write-downs related to the mortgage market in its most recent quarterly results. The hit to the company's balance sheet forced John Mack, its chief executive, to seek a rescue refinancing from an arm of the Chinese government, which is paying $5bn for a stake of up to 10 per cent in the company. Yesterday, the respected finance industry analyst Meredith Whitney, of Oppenheimer & Co, cut her outlook for Morgan Stanley, saying that many parts of its once-booming debt business had dried up.

"Capital markets activity remains weak as fixed-income issuance continues to be anaemic in all categories but plain vanilla high-grade debt, the lowest margin fixed-income product," she wrote. She more than halved her estimate of Morgan Stanley's first-quarter earnings to 65 cents per share from $1.47 per share.

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