Bloomberg News

Morgan Stanley Cuts Share of Revenue for Compensation

October 18, 2013

Morgan Stanley Headquarters in New York

Companywide compensation and benefits rose 2.5 percent to $12.3 billion in the first nine months as adjusted revenue increased 8.1 percent to $24.9 billion. Photographer: Victor J. Blue/Bloomberg

Morgan Stanley, owner of the world’s biggest brokerage, set aside a smaller share of revenue to pay employees at its investment-banking and trading division in the first nine months of the year.

Compensation for staff at the institutional securities unit was $5.28 billion in the period, according to figures posted today on the New York-based firm’s website. Salaries, bonuses and previous deferred awards equaled 42 percent of adjusted revenue, down from 46 percent a year earlier.

Chief Executive Officer James Gorman, 55, joins Goldman Sachs (GS:US) Group Inc. and JPMorgan (JPM:US) Chase & Co. in cutting the amount of revenue allocated to paying bankers and traders. Chief Financial Officer Ruth Porat said in April that the firm is seeking to set aside about 40 percent of revenue for pay in institutional securities.

Companywide compensation and benefits rose 2.5 percent to $12.3 billion in the first nine months as adjusted revenue increased 8.1 percent to $24.9 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 (MS:US), under the theory that it would be more expensive to buy back the securities.

The bank’s total compensation cost was enough to pay each of the firm’s 56,101 employees $219,051 on average for the nine months, more than the $207,688 it set aside for each of the 57,726 employees a year earlier, figures released today show. The company doesn’t disclose how many people work in institutional securities.

Brokerage Division

Morgan Stanley (MS:US)’s brokerage division employed 16,517 financial advisers at the end of September, up from 16,378 a year earlier. It set aside $6.12 billion for pay in the nine months, up from $5.89 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 58 percent of its revenue, compared with 61 percent a year earlier.

Goldman Sachs allocated 41 percent of revenue for employee pay in the first nine months, down from 44 percent for the same period of 2012. The $10.4 billion expense is enough to pay each of the New York-based firm’s 32,600 employees $319,755 for the nine-month period.

Compensation for corporate and investment bankers at New York-based JPMorgan, the largest U.S. lender, represented 31 percent of the unit’s revenue, compared with 34 percent in the year-earlier period.

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: Laura Marcinek in New York at lmarcinek3@bloomberg.net; Michael J. Moore in New York at mmoore55@bloomberg.net

To contact the editors responsible for this story: Christine Harper at charper@bloomberg.net; David Scheer at dscheer@bloomberg.net


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Companies Mentioned

  • GS
    (Goldman Sachs Group Inc/The)
    • $175.47 USD
    • 0.32
    • 0.18%
  • JPM
    (JPMorgan Chase & Co)
    • $58.49 USD
    • -0.01
    • -0.02%
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