Morgan Stanley said Tuesday it will restructure its residential mortgage business and cut about 600 employees in a move that "reflects current market conditions."
The investment bank's shares were up $2.16, or 3.4 percent, to $66.17 in afternoon trading on the New York Stock Exchange.
The investment bank said it will cut approximately 500 employees in the United States and another 100 in Europe -- mostly in the U.K. -- and consolidate its mortgage businesses under a single platform.
The move comes amid a steep drop in mortgage lending, hammered in recent months by rising defaults in the subprime sector that caused widespread distress among lenders, home builders and other markets.
Lehman said it would slash 850 employees in the U.S. and U.K. on top of the 1,200 it cut when it shut down subprime lender BNC Mortgage. HSBC said it is closing its U.S. mortgage unit, cutting 750 jobs, while Credit Suisse said it plans to cut 150 jobs.
Morgan Stanley operates three mortgage businesses in the United States: Saxon Capital, an originator of subprime loans; Morgan Stanley Credit, a retail prime loan provider; and Morgan Stanley Mortgage Capital Holdings, which consolidates loans.