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Morgan Stanley Cuts Investment Bank Pay to 43% of Revenue

Morgan Stanley Cuts Investment Bank Pay to 43% of Unit's Revenue
The bank's total compensation cost was enough to pay each of the firm's 55,610 employees $149,631 on average for the six months, more than the $137,496 it set aside for each of the 58,627 employees a year earlier, figures released today show. Photographer: Scott Eells/Bloomberg

Morgan Stanley, owner of the world’s biggest brokerage, set aside 1.4 percent less to pay people at its investment-banking and trading division in the first half.

Compensation for staff at the institutional securities unit was $3.66 billion, according to figures posted today on the New York-based firm’s website. Salaries, bonuses and previous deferred awards equaled 43 percent of adjusted revenue, down from 46 percent a year earlier.

Morgan Stanley has cut pay and jobs, deferred bonuses and toughened clawback rules as Chief Executive Officer James Gorman, 55, copes with increases in capital requirements and regulation. Chief Financial Officer Ruth Porat said in April that the bank seeks to set aside about 40 percent of revenue for pay in institutional securities.

The bank today reported a 66 percent quarterly earnings increase that beat analysts’ estimates as stock-trading revenue jumped and wealth-management profit margins climbed to a record. Its shares rose to $27.72 at 8:55 a.m. in New York from $26.54 yesterday.

Companywide compensation and benefits rose 3.2 percent to $8.32 billion in the first half as adjusted revenue increased 8.4 percent to $16.8 billion. That revenue figure excludes accounting charges known as debt-valuation adjustments. Those changes stem from increases in the value of the company’s debt, under the theory that it would be more expensive to buy back the securities.

Per Person

The bank’s total compensation cost was enough to pay each of the firm’s 55,610 employees $149,631 on average for the six months, more than the $137,496 it set aside for each of the 58,627 employees a year earlier, figures released today show. The company doesn’t disclose how many people work in institutional securities.

Morgan Stanley’s brokerage division employed 16,321 financial advisers at the end of June, down from 16,478 a year earlier. It set aside $4.1 billion for pay, up from $3.9 billion a year earlier, according to figures in today’s report.

The unit’s compensation cost, set by a fixed grid for some employees, was 59 percent of its revenue, compared with 60 percent a year earlier.

Goldman Sachs Group Inc. said this week it set aside a smaller portion for staff pay in the first half and cut 300 jobs in the second quarter as it seeks to pare expenses. Compensation rose 10 percent to $8.04 billion in the six months, while revenue increased 13 percent to $18.7 billion.

The expense is enough to pay each of Goldman Sachs’s 31,700 employees $253,691 for the first six months of the year.

JPMorgan’s Tally

Compensation for corporate and investment bankers at JPMorgan Chase & Co., the largest U.S. lender, was almost unchanged in the first half from a year earlier. The $6.36 billion represented 33 percent of revenue at the unit.

The average compensation figures are derived by dividing the total compensation pool by the number of employees, and they don’t represent individual workers’ actual pay. Investment banks set aside revenue throughout the year for pay and typically decide bonuses at year-end.

Download: Earnings

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