Morgan Stanley's Pay Set-Aside Climbs as Goldman Sachs's Falls

Morgan Stanley, buoyed by rising revenue, set aside 37 percent more money to pay employees in the first half of 2010 even as rivals Goldman Sachs Group Inc. and JPMorgan Chase & Co.’s investment bank lowered their compensation expenses.

Morgan Stanley allocated $7.94 billion to pay employees in the first six months of 2010, up from $5.78 billion a year earlier, company data show. Goldman Sachs’s first-half compensation dropped to $9.3 billion from $11.4 billion and JPMorgan’s investment bank set aside $5.3 billion versus $6 billion. All of the figures exclude U.K. bonus tax costs.

The jump at Morgan Stanley, the sixth-biggest U.S. bank by assets, is connected to an improvement in revenue during the period that was helped by better trading results than analysts expected, said Jeanne Branthover, managing director at recruitment firm Boyden Global Executive Search. Morgan Stanley’s equity trading revenue in the second quarter outstripped all of its biggest rivals.

“They must have extremely good people in those jobs and they’re performing,” Branthover said of New York-based Morgan Stanley. “They’re coming out winners.”

Employee Ranks

The three Wall Street firms added 5,125 employees in the last year, with more than half -- 2,900 -- joining Goldman Sachs. That contributed to a drop in average pay per employee at Goldman Sachs to $272,581 in the first half from $364,135 a year earlier, while Morgan Stanley’s average climbed to $126,244 from $94,465 a year earlier.

Morgan Stanley added 20,000 employees on May 31, 2009, when it completed a deal to combine its brokerage unit with Citigroup Inc.’s Smith Barney. The higher first-half compensation cost this year reflects the fact that those employees were only counted for June in the first half of 2009.

Even with the increase, Morgan Stanley is putting aside a smaller percentage of revenue for compensation expenses compared with 2009, as first-half revenue more than doubled. The firm set aside 47 percent of revenue for pay costs, excluding the U.K. bonus tax, compared with 71 percent a year earlier.

Goldman Sachs’s compensation costs accounted for 43 percent of revenue, compared with 49 percent a year earlier. JPMorgan’s investment bank set aside 36 percent in the first half, from 38 percent in the first six months of 2009.

To contact the reporter on this story: Christine Harper in New York at

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