Bloomberg News

Morgan Stanley Boosts Investment Bank’s Compensation Pool 10%

April 19, 2012

Companywide compensation and benefits rose 3 percent to $4.43 billion as adjusted revenue increased 14 percent to $8.9 billion. Photographer: Peter Foley/Bloomberg

Companywide compensation and benefits rose 3 percent to $4.43 billion as adjusted revenue increased 14 percent to $8.9 billion. Photographer: Peter Foley/Bloomberg

Morgan Stanley (MS:US), the sixth-largest U.S. bank by assets, set aside $2.11 billion to pay employees at its investment-banking division in the first quarter, 10 percent more than a year earlier.

Revenue at the unit rose 33 percent to $5 billion when the impact of an accounting loss was excluded. Compensation at the institutional-securities unit, which includes salaries, bonuses and benefits for traders and bankers, was 42 percent of adjusted revenue, down from 51 percent a year earlier when calculated on the same basis, according to figures posted on the New York- based firm’s website.

Morgan Stanley has cut compensation, capped cash bonuses and made clawbacks stricter as Chief Executive Officer James Gorman, 53, seeks to improve returns amid an industrywide decline in revenue. Gorman took a 25 percent pay cut for last year’s performance, and the firm limited immediate cash bonuses to $125,000 as the shares fell (MS:US) 44 percent in 2011.

Companywide compensation and benefits rose 3 percent to $4.43 billion as adjusted revenue increased 14 percent to $8.9 billion. That was enough to pay each of the firm’s 59,569 employees $74,384 on average for the period, more than the $68,567 it set aside for each of the 62,494 employees a year earlier, according to figures released today. The bank doesn’t report how many people work in institutional securities.

The company recorded a $2 billion loss in the first quarter from an accounting charge known as a debt valuation adjustment, or DVA. It stems from increases in the value of the company’s debt, under the theory that it would be more expensive to buy back the securities. The $2 billion loss, which is included in the institutional securities division, compares with a $189 million loss from DVA in the first quarter of last year, the firm said today.

Morgan Stanley’s brokerage division, which employed 17,193 financial advisers at the end of March, down from 18,124 a year earlier, set aside $2.105 billion for pay, little changed from $2.109 billion in the first quarter of 2011. The unit’s compensation cost, which is set by a fixed grid for some employees, was 62 percent of its revenue, the same as a year earlier, the firm reported.

JPMorgan, Goldman Sachs

Goldman Sachs Group Inc. (GS:US) said this week that it set aside $4.4 billion to compensate staff in the first quarter, 16 percent less than a year earlier and enough to give each of its 32,400 employees $135,123.

Compensation costs at JPMorgan Chase & Co. (JPM:US)’s investment bank fell 12 percent to $2.9 billion in the first quarter, according to figures posted on the firm’s website last week. The expense was enough to pay each of the division’s 25,707 workers an average of $112,849 for the first three months of the year.

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.

To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net.

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.


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Companies Mentioned

  • MS
    (Morgan Stanley)
    • $31.41 USD
    • -0.27
    • -0.86%
  • GS
    (Goldman Sachs Group Inc/The)
    • $164.8 USD
    • 1.38
    • 0.84%
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