Morgan Stanley is Serious About Compensation Control
Every U.S. bank is working to keep salaries and bonuses under control. Morgan Stanley appears the most vigilant.
Compensation expenses during the first quarter fell to $4.2 billion, down from $4.4 billion a year earlier. If you exclude severance payments for laid-off workers, Morgan Stanley’s compensation ratio – pay and benefits costs compared to net revenues – was around 40%, according to the Financial Times. That’s a really low number for Morgan Stanley, and one that may remain unchanged.
“We’re targeting 40-ish percent over time,” Chief Financial Officer Ruth Porat told investors on Thursday.
Couple low pay with Morgan’s propensity to give out zero bonuses, along with its aggressive bonus deferral initiative for top earners, and Morgan begins to separate itself from competitors when it comes to compensation control.
The bank’s conservative approach can be seen throughout its first quarter performance. Morgan Stanley continues to deemphasize risky fixed income trading – revenue fell 42% from a year ago, a big drop compared to rivals – while further investing in its more stable wealth management business, which booked $3.47 billion in net revenue, up roughly 5% on the year and quarter-over-quarter.
The sea change likely leaves Morgan Stanley bankers wanting more. Compensation expenses for the institutional securities division fell by 13.6% during the quarter. One would have to assume fixed income staffers took the biggest hit.
Rich Ricci’s departure as Barclays’ investment banking head leaves a French-American duo at the top of the unit. It also puts Chief Executive Antony Jenkins in the driver’s seat of the entire bank.
With Ricci out, ten of the world’s 14 largest investment banks have now said goodbye to their chief executive since the beginning of 2012. Wow.
Former WestLB AG analyst John Davies wasn’t out of work long. Standard Chartered hired him as a U.S. interest-rates strategist in London just a week after he left WestLB, where he had been since 1999.
Blackstone president Tony James pleased investors early on Thursday’s conference call, noting the private equity giant booked one of its best quarters since going public. He quickly killed their buzz by calling U.S. economic growth “anemic,” fueled only by low interest rates.
The proposed rule that would enable hedge funds to advertise their services publicly was thought to be a done deal. It’s not, apparently.
Knight Capital’s $461 million trading loss, triggered by a simple software glitch, cost Chief Executive Thomas Joyce and other top executives their cash bonus for 2012. Joyce's overall compensation for 2012 fell by roughly 41% to $3.7 million.
Buzz Around the Office
This has likely never happened at an investment bank. Simon Wolfson, CEO of U.K. department store Next, is gifting his entire $3.6 million bonus to his employees. It works out to around a 1% raise for the average employee.
List of the Day: Rookie Investment Bankers
If you’re new to investment banking, keep these tips in mind.
- Sign up for a frequent flyer program immediately.
- Enroll in an American Express Rewards program.
- Get a gym membership. Use it when you can.