Morgan Stanley's Tier 1 common ratio was about 14.6 percent under Basel 1 and between 6.5 percent and 7 percent under Basel III rules, Porat said on the conference call today. The firm expects its required buffer from being a systemically important financial institution to be 2 percent and plans to run closer to the 9 percent level sooner than required, she said.
Compensation and benefits increased 20 percent from the year-earlier quarter to $4.68 billion, or 50 percent of the firm's overall revenue. The ratio was higher than in the second quarter of 2010, when the bank set aside 49 percent of revenue.
China Venture
Morgan Stanley's expenses included a $130 million charge tied to a joint venture in China with Huaxin Securities Co. that began operations in June. Morgan Stanley established the venture after selling its 34.3 percent stake in China International Capital Corp. last year.
Morgan Stanley was the second-ranked adviser on mergers announced in the first half of this year, as well as the third- ranked underwriter of stock offerings, according to data compiled by Bloomberg. The firm finished 2010 as both the top underwriter of equity offerings and the top adviser on announced mergers and acquisitions globally for the first time since Bloomberg began compiling data in 1999.
Morgan Stanley bought a controlling stake in a joint venture with Citigroup's Smith Barney unit in 2009, giving it a retail brokerage with 17,638 advisers and $1.71 trillion in client assets as of June 30.