Morgan Stanley's underperformers must expect zero bonuses

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As bonuses approach, there are rumours of apprehension at Morgan Stanley. After an incredibly bad third quarter in which Morgan Stanley's trading operations did manifestly worse than rivals, the bank is said to be dissatisfied with some of its recent hires.

In August 2009, Morgan Stanley announced its intention of making 400 sales and trading hires. It reiterated this in January 2010, when James Gorman said the bank needed to "seriously grow" its "footprint in products like currencies, equity derivatives, commodities."

Since then, Morgan Stanley appears to have completed most, but not all, its recruitment. In the bank's third quarter conference call, Gorman said the bank was 70% of the way through its sales and trading hiring. He subsequently confirmed that the bank wants to hire salespeople and traders, particularly in rates and FX, next year.

Gorman has also promised not to make any redundancies, but this doesn't seem to be doing much to assuage the concerns of people who were hired in 2009 and no longer have the comfort of a guaranteed bonus.

"There's a lot of disappointment at Morgan Stanley with some of the hires that were made," alleges one headhunter. "Some people are going to get zero bonuses in the hope that they clear out and make way for upgrading in 2011."

"Morgan Stanley's still underweight in a lot of areas," says one fixed income headhunter. "But there will be clear signs this year to the people there who are not up to par. You're going to see a lot of zeros."