By Olivia Oran
(Reuters) - Morgan Stanley (N:MS) is eyeing quarterly revenue of around $1 billion for its fixed income, currencies and commodities trading unit, Chief Executive James Gorman said on Tuesday.
The Wall Street bank is seeing revenues grow in its bond trading business, or FICC, even with reduced headcount, Gorman said, speaking at the bank's U.S. Financials Conference in New York.
Morgan Stanley is targeting $4 billion or more in FICC revenue annually, he added.
"It's not great, I'm not celebrating that ... but that's the kind of threshold we want to get the business to and obviously move it up from that point forward," Gorman said.
Gorman had not previously given investors revenue guidance around the FICC business in the last several quarters.
Morgan Stanley has been focused on rebuilding morale in its bond trading unit and retaining existing employees, he added, after the bank cut 25 percent of its fixed income trading jobs last year.
The firm is trying to move away from volatile businesses like trading to more stable areas such as wealth management. Gorman said Morgan Stanley is finished with major headcount reductions in FICC for the next 12 months. "We aren't in the business of every quarter chopping and changing," he said.
Wall Street firms broadly are struggling with weakness in their fixed income units as regulations have made trading less profitable. Morgan Stanley executives have previously said they believe the pool for fixed income trading has shrunk substantially over the last three years to $100 billion industry-wide from $150 billion to $160 billion in the past.
In the first quarter, Morgan Stanley generated FICC revenue of $873 million, down 56 percent from $1.9 billion a year ago.
In January, the bank named Sam Kellie-Smith, who previously ran equities trading, as a new head for its fixed income trading business. Ted Pick, who previously ran the bank's equities trading unit, was tasked by Gorman last year to oversee its entire trading business.
Gorman said the trading environment in the second quarter has improved somewhat from the beginning of the year, though he remained cautious in light of upcoming macro events like Brexit that could swing markets.
"The environment was not as bad as everybody predicted and that has carried through to the second quarter ... but I would just be a little cautious because we have a lot of stuff coming up in the next couple of weeks," he said.