Morgan to trim loan division

Morgan Stanley said Tuesday that it was cutting about 600 jobs and slimming down its mortgage business, after a credit crisis upended the home loan industry this summer and forced other investment banks into similar moves.

Two weeks after the Wall Street investment bank missed analysts’ expectations for the fiscal third quarter and took a write-down of $940 million for corporate loans stuck on its books, Morgan Stanley said it would eliminate about 1% of its workforce.

“It is the direction everybody is going,” said Sanford C. Bernstein & Co. analyst Brad Hintz. “This is Wall Street voting with their feet about how rapidly the mortgage market is coming back. They are saying it is not coming back quickly.”

As part of a plan to fuse its three mortgage businesses into one subsidiary based in Irving, Texas, Morgan Stanley will close certain offices and cut 500 jobs in the U.S. and 100 in Europe.

Morgan Stanley said reshuffling these businesses would make the company more efficient and provide the opportunity to profit after the industry recovered.

The mortgage industry plunged into distress this summer as more borrowers missed payments on their home loans and investors soured on risky mortgage debt. This made it harder to sell home loans and forced dozens of lenders out of business.

The company said that the mortgage industry had changed and that banks had to rethink their position in the mortgage business. Morgan joins retail and investment banks, including Bear Stearns Cos. and Lehman Bros. Holdings Inc., in revamping its mortgage business.

Shares of New York-based Morgan Stanley climbed $2.09, or 3.3%, to $66.10.