Bloomberg News

Morgan Stanley Cuts Pay Pool for Investment Bank by 15%

July 19, 2012

Morgan Stanley Cuts Investment Bank Pay Pool 15% in First Half

Morgan Stanley’s companywide compensation, the firm’s largest expense, was enough to pay each of its 58,627 employees $137,548 for the six months, down from $142,337 for each of the 62,577 employees at the end of the second quarter of 2011, according to figures released today. Photographer: Victor J. Blue/Bloomberg

Morgan Stanley (MS:US), the sixth-largest U.S. bank by assets, set aside $3.53 billion in the first six months to pay investment bank employee salaries, bonuses and benefits, down 15 percent from a year earlier.

Pay at the institutional-securities unit, which employs traders and bankers, was 57 percent of revenue, compared with 47 percent in the first half of 2011, according to the New York- based company’s website. The unit’s revenue fell 28 percent to $6.26 billion during the period. Compensation and benefits for the whole company totaled $8.06 billion, down 9.5 percent.

Wall Street firms are looking to cut expenses as revenue from investment banking and trading fell for the seventh time in eight quarters. Goldman Sachs Group Inc. (GS:US) will seek $500 million in additional cost reductions this year after first-half revenue fell to the lowest since 2005. Bank of America Corp. (BAC:US) plans to trim $3 billion in annual expenses from investment banking, trading and wealth-management units.

Adjusted for accounting gains and losses related to the firm’s credit spreads, known as debt-valuation adjustments or DVA, first-half revenue at the institutional-securities unit fell 9.1 percent to $7.89 billion. The ratio of compensation to revenue on that basis fell to 45 percent in the first half of 2012 from 48 percent in the same period last year.

Companywide Compensation

Morgan Stanley’s companywide compensation, the firm’s largest expense (MS:US), was enough to pay each of its 58,627 employees $137,548 for the six months, down from $142,337 for each of the 62,577 employees at the end of the second quarter of 2011, according to figures released today. The bank, which said today it plans to reduce headcount by more than 700 over the rest of the year, doesn’t report how many people work in institutional securities.

Morgan Stanley’s brokerage division, which employed 16,934 financial advisers at the end of June compared with 17,987 a year earlier, set aside $4.1 billion for pay in the first half, down 3.3 percent from a year earlier. The unit’s compensation cost, which is set by a fixed grid for many employees, was 61 percent of the division’s revenue, down from 62 percent last year.

Goldman Sachs cut 1,000 jobs in the first six months and slashed pay costs 14 percent to $7.29 billion. The expense, at 44 percent of revenue, is enough to pay each of Goldman Sachs’s 32,300 employees $225,789 for the first half of the year.

JPMorgan Chase & Co. (JPM:US), the largest U.S. lender, cut first- half compensation expenses at its investment bank 16 percent to $4.91 billion, or 35 percent of revenue. That would be enough to pay each of the 26,553 workers in the unit an average of $184,989 for the period.

Wall Street firms typically reserve a portion of revenue throughout the year for employees, awarding much of the money as year-end bonuses. 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.

To contact the reporters on this story: Michael J. Moore in New York at mmoore55@bloomberg.net; Christine Harper in New York at charper@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)
    • $38.72 USD
    • -0.09
    • -0.23%
  • GS
    (Goldman Sachs Group Inc/The)
    • $195.45 USD
    • -0.44
    • -0.23%
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