Morgan Stanley, Wall Street’s biggest stock-trading firm by revenue, is cutting its global bonus pool for the equities division by as much as 4 percent and dismissing some employees after the industry’s results flagged last year, according to people with knowledge of the plans.
The firm, which is set to pay annual bonuses next month, has been fine-tuning calculations for pay packages since November, according to the people, who asked not to be identified describing the deliberations. Traders and salespeople across the investment bank were terminated this week as part of an annual performance review, the people said.
Wall Street firms that have been cost-cutting to improve profits in the wake of the financial crisis are set to focus on equities personnel after new issuance decreased in 2016. Stock traders and salespeople around the world may see compensation for the year fall 9 percent, the first drop since 2012, according to a November report from recruiting firm Options Group. Meanwhile, fixed-income personnel should see the first increase since 2012 after political events set off a frenzy of transactions, according to the report.
Morgan Stanley’s equities revenue dropped 3.5 percent to $6.08 billion in the first nine months of 2016. Citigroup Inc., Goldman Sachs Group Inc. and Bank of America Corp. all suffered declines of 12 percent to 14 percent in that business, while the biggest European investment banks all reported decreases of more than 20 percent on a dollar basis. JPMorgan Chase & Co. posted the smallest drop, about 1 percent.
BofA Cuts
Bank of America set aside about 5 percent less for equities traders’ bonuses, as fees have dwindled along with a decline in stock issuances, people with knowledge of the matter said. The decline also reflects the impact of fewer employees in the business, the people said.
“Morgan Stanley and other U.S. banks can afford to cut bonuses, since they face reduced competition thanks to European banks being lame ducks due to European regulations on bonuses,” said Jason Kennedy, chief executive officer of recruitment firm Kennedy Group in London.
Morgan Stanley cut compensation costs at its investment banking and trading unit by 11 percent in the first nine months of 2016, as revenue dropped 12 percent. The firm is set to announce its full-year pay expenses later this month.
Ted Pick, who led Morgan Stanley’s equities business to the top spot in the years after the financial crisis, was put in charge of all the company’s trading in October 2015. Last year, Pick tapped stock-trading executive Sam Kellie-Smith to help turn around the firm’s fixed-income unit, while Peter Santoro was elevated to head of equity trading.
This article was provided by Bloomberg News.