Morgan Stanley is cutting 1,600 jobs (but will at least wait until after Christmas)

The festive season is upon us, but – as State Street has proved – that doesn't mean that financial service firms are refraining from redundancies. Morgan Stanley has now succumbed to the need to pare back headcount, but is at least waiting until the new year to implement the cuts.

Morgan Stanley has told us that it will make 1,600 redundancies globally in the first quarter of next year.

Here's the official confirmation from a Morgan Stanley spokesperson: "As we conduct our year-end performance management process and evaluate the right size of the franchise for 2012, we anticipate the elimination of approximately 1,600 positions across the firm globally impacting all job levels - to take place early in the first quarter of 2012."

We're told that the decision-making process is ongoing, so it's not yet clear which divisions would be most severely hit, but we understand that its US-based financial advisers – around 18,000 people – will escape any cuts.

Inevitably, however, it seems that FICC will feel the most pain. Morgan Stanley's equity trading division performed comparatively well in Q3, with 'clean' (excluding debt value adjustment) revenues up by 29% against an industry average of 2.5%, according to figures from Nomura analysts.

In FICC, though, revenues ex-DVA were down 32% (compared to an average decline of 29%). Considering this is where Morgan Stanley has been ramping up over the last year or so, it doesn’t look great for traders in this division.

It's a sad inevitability that the investment banks that have so far refrained from making redundancies have slowly have conceded the necessity to do so. Citigroup confirmed this month that it would be making 4,500 redundancies and now Morgan Stanley will cut 1,600.

Without the 18,000 financial advisers, the redundancies will be spread across Morgan Stanley's remaining 44,000 employees. The cuts therefore amount to around 4% of total headcount.

Assuming they're distributed equally across the firm's various offices, this means 200 of Morgan Stanley's 5,000 London-based employees will be affected.

It hasn't been a great year for the bank. For a start, there were the concerns about its exposure to the Eurozone, which led to its share price plummeting in September.

Then there's the fact that its compensation bill has continued to increase this year (by 8% on 2010), suggesting that it's perhaps being overly-generous considering its high cost-income ratio. Clean revenues for its investment bank were just $3.3bn, costs were $3bn, meaning that the cost-income ratio was hovering around 91% in Q3.

Chief executive, James Gorman, has already said to bankers and traders that they should expect measly bonuses this year, but cutting variable compensation has clearly proved inadequate.

It could be worse, however; in July the bank was said to be running "layoff scenarios into several thousand folks". The actual cuts therefore appear comparatively light.