Wall Street banks like Goldman Sachs and Morgan Stanley couldn’t have drawn it up any better. They each cut their ratio of compensation to revenue during the second quarter – likely appeasing regulators and the general public – all while paying their average employee more money.
Two days following Goldman’s impressive earnings, Morgan Stanley on Thursday reported net income of $980 million for Q2, up 69% from the previous year’s quarter, buoyed by a particularly strong performance from its institutional securities arm. Compensation expenses rose nearly 15% in the quarter – from $3.6 billion to $4.1 billion.
Still, bankers received a smaller piece of the pie, albeit a more lucrative one due to rising revenues. The ratio of compensation to adjusted revenue for Morgan Stanley’s institutional securities unit fell to 43% during the first half of the year, down from 46% in the same period of 2012. It was the same story at Goldman, where the average employee took home nearly $30,000 more during the first half of the year despite a 1 percentage point drop in the comp ratio.
Bankers at the firms likely aren’t complaining – at least not openly – but the mood may change dramatically if revenues drop during the second half of 2013. Morgan Stanley on Thursday reiterated its goal of cutting the compensation ratio further, to 40%.
“We are continuing to focus on expense reduction,” said CFO Ruth Porat. “There's more to do.”
One thing has become clear in 2013. It’s a pretty good time to be a shareholder of a U.S. bank. You’re the priority, and bank stocks are sailing.
Landing a Job at Deloitte (eFinancialCareers)
Deloitte plans to make roughly 17,000 hires across all U.S. businesses during fiscal year 2014. The Big Four firm is seeing a particular demand within its advisory group.
Let Your Soul Cycle (Bloomberg)
Dealmakers on Wall Street are still wining and dining clients, but more often than not there is no booze or food involved. Many have started taking clients to high-end workout classes instead.
Outrageous Things Hedge Managers Say (eFinancialCareers)
There are those manic moments when hedge fund managers blurt out something so heinous, horrendous or just downright hilarious. Here are some of the most notable.
Fines Levied (BBW)
U.S. regulators have ordered former Goldman Sachs exec Rajat Gupta to pay nearly $14 million for passing inside information to billionaire hedge-fund manager Raj Rajaratnam.
Getting Creative (Financial News)
European banking executives have hinted that they’ll look to get creative to reward top performers despite impending bonus gaps. Pay consultants believe they’ll be hard-pressed pulling it off.
Slightly Paranoid (Business Insider)
Wall Street bankers could use Snapchat, a mobile app that lets you send self-destructing photos and videos, to facilitate insider trading, at least according to CNBC's Jim Cramer.
Commodities Plunging (Reuters)
The average commodities fund has lost money every month since January, marking the longest losing streak on record.
Buzz Around the Office
Police ‘Force’ (NY Magazine)
New York City police officers are reportedly using “force” to keep crime down in Brooklyn. Cops have been seen cruising around town playing Darth Vader's theme song from Star Wars at full blast in an apparent attempt to keep criminals on their toes.
List of the Day: Consulting Advice
If you just got your first consulting gig, do this next.
- Network, network, network.
- Get your wardrobe and business luggage in order.
- Freshen up on Microsoft Office.
(Source: The Daily Muse)