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A tough year for the firm didn't quite translate to bankers' wallets

Morgan Stanley dropped bankers' pay 10%: They got off easy

Morgan Stanley’s institutional securities division has a tough year. Though the resulting fall in compensation at the division might seem cause for disappointment, its employees seem to have gotten off quite lightly.

For 2022, the bank paid out $8.2bn in compensation and benefits in institutional securities, a fall of 10% from the previous year. However, the division’s net income dropped by a far starker 41%.

The biggest revenue drops came in equity capital markets (ECM) where revenues were down 81% in 2022 and debt capital markets (DCM), where they fell 39%.

As at Goldman Sachs, sales and trading revenues were more robust. Equities sales and trading revenues still fell, but by a mere 6%. Revenues in fixed income currencies and commodities (FICC) trading rose by 20%.

As the chart above shows, Morgan Stanley's bankers and traders were distinctly mid-range performers last year.  Where revenues rose, they rose by less than rivals. Where revenues fell, they fell by less too. 

In the circumstances, a 10% decline in pay at the institutional securities unit looks generous, particularly as the bank is being squeezed by cost increases elsewhere. Non-compensation expenses were up 4% in 2022. This was down to the need to, “feed the beast,” said CEO James Gorman, and to invest for future growth. 

Gorman added that he's confident that when the Federal Reserve pauses rate hikes, underwriting activity will recover. 

In the meantime, Gorman said the firm has been rightsizing its headcount. Morgan Stanley doesn't break out employee numbers by division, but the firm cut 1,600 staff in September, roughly 2% of its total workforce. This might explain some of the cut to pay in the investment bank, but not all. 

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Photo by Amy Reed on Unsplash

AUTHORAlex McMurray Editor

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