Business World

Saturday 21 October 2017

Morgan Stanley cuts global bonus

Morgan Stanley (Bloomberg)
Morgan Stanley (Bloomberg)

Hugh Son

Morgan Stanley, Wall Street's biggest stock-trading firm by revenue, is cutting its global bonus pool for the equities division by as much as 4pc and dismissing some employees after the industry's results flagged last year, according to people with knowledge of the plans.

The firm, which is set to pay annual bonuses next month, has been fine-tuning calculations for pay packages since November, according to the people, who asked not to be identified describing the deliberations.

Traders and salespeople across the investment bank were terminated this week as part of an annual performance review, the people said.

Wall Street firms that have been cost-cutting to improve profits in the wake of the financial crisis are set to focus on equities personnel after new issuance decreased in 2016. Stock traders and salespeople around the world may see compensation for the year fall 9pc, the first drop since 2012, according to a November report from recruiting firm Options Group.

Meanwhile, fixed-income personnel should see the first increase since 2012 after political events set off a frenzy of transactions, according to the report.

Morgan Stanley's equities revenue dropped 3.5pc to $6.08bn (€5.77bn) in the first nine months of 2016. Citigroup, Goldman Sachs and Bank of America all suffered declines of 12pc to 14pc in that business, while the biggest European investment banks all reported decreases of more than 20pc on a dollar basis. JPMorgan Chase posted the smallest drop, about 1pc.

Bank of America set aside about 5pc less for equities traders' bonuses, as fees have dwindled along with a decline in stock issuances, people with knowledge of the matter said.

The decline also reflects the impact of fewer employees in the business, they said.

"Morgan Stanley and other US banks can afford to cut bonuses, since they face reduced competition thanks to European banks being lame ducks due to European regulations on bonuses," Jason Kennedy, ceo of recruitment firm Kennedy Group in London, said.

Morgan Stanley cut compensation costs at its investment banking and trading unit by 11pc in the first nine months of 2016, as revenue dropped 12pc. The firm is set to announce its full-year pay expenses later this month.

Bloomberg

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