Morgan Stanley Reduces Investment-Bank Pay to $5.2 Billion
Morgan Stanley (MS), the sixth-largest U.S. bank by assets, set aside $5.2 billion in the first nine months of 2012 to pay investment-bank employees, a 9 percent decline from a year earlier.
The ratio of compensation to revenue in the unit fell to 44.9 percent, compared with 48.4 percent in the same period a year earlier, when excluding accounting gains and losses related to the firm’s credit spreads. That’s still higher than Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM)’s investment bank. Compensation and benefits for all of Morgan Stanley totaled $12 billion in the first nine months, down 4 percent.
Pay expenses at the institutional-securities unit, which includes salaries, bonuses, benefits and the cost of deferred pay for bankers and traders, were $1.6 billion in the third quarter, an 8 percent increase from a year earlier, the New York-based company said today on its website.
The world’s biggest banks are cutting costs amid concerns that the global economy will slow revenue growth and new capital rules will depress returns. Morgan Stanley Chief Executive Officer James Gorman, 54, said in an interview with the Financial Times published earlier this month that Wall Street employees are “still overpaid.”
Morgan Stanley, which said in July it planned to reduce more than 700 positions during the rest of the year, eliminated 901 jobs in the quarter ended Sept. 30. In the past 12 months the company shed 4,519 employees, or 7 percent of its workforce, from job cuts and unit sales.
JPMorgan, the largest U.S. lender by assets, cut compensation expenses at its investment bank by 9.4 percent in the first nine months of the year as the business generated 7.1 percent less revenue. It was enough to give each of the division’s 25,884 employees $269,703.
Goldman Sachs set aside almost $11 billion to pay employees in the first nine months of the year, up 10 percent from the same period in 2011 as revenue climbed. Goldman Sachs’s cost was equivalent to $336,441 for each of its 32,600 workers as of Sept. 30.
Wall Street firms typically reserve a portion of revenue throughout the year for employees. Average pay per worker doesn’t reflect the amount of money employees actually receive. Top executives and revenue producers sometimes receive multimillion-dollar awards, while clerical workers get smaller salaries.
Adjusted for accounting gains and losses related to the firm’s credit spreads, known as debt-valuation adjustments or DVA, revenue at the Morgan Stanley’s institutional-securities unit fell 1.27 percent to $11.5 billion in the nine months.
Morgan Stanley’s companywide compensation, the firm’s largest expense, was enough to pay each of its 57,726 employees $207,757 for the nine months, up from $201,542 for each of the 62,245 employees at the end of the third quarter of 2011, according to figures released today. The bank doesn’t report how many people work in institutional securities.
Morgan Stanley’s brokerage division, which employed 16,829 financial advisers at the end of September, set aside $6.15 billion for pay in the nine months, down 1 percent from a year earlier. The unit’s compensation cost, which is set by a fixed grid for some employees, was 61 percent of the division’s revenue, down from 62 percent last year.
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