Morgan Stanley Joins Rivals Cutting Portion of Revenue for Pay

Morgan Stanley, owner of the worldís biggest brokerage, set aside a smaller share of revenue to pay employees at its investment-banking and trading division in the first nine months of the year.

Compensation for staff at the institutional securities unit was $5.28 billion in the period, according to figures posted today on the New York-based firmís website. Salaries, bonuses and previous deferred awards equaled 42 percent of adjusted revenue, down from 46 percent a year earlier.

Chief Executive Officer James Gorman, 55, joins Goldman Sachs Group Inc. and JPMorgan Chase & Co. in cutting the amount of revenue allocated to paying bankers and traders. Chief Financial Officer Ruth Porat said in April that the firm is seeking to set aside about 40 percent of revenue for pay in institutional securities.

Companywide compensation and benefits rose 2.5% to $12.3 billion in the first nine months as adjusted revenue increased 8.1% to $24.9 billion. That revenue figure excludes accounting charges known as debt-valuation adjustments. Those changes stem from increases in the value of the companyís debt, under the theory that it would be more expensive to buy back the securities.

The bankís total compensation cost was enough to pay each of the firmís 56,101 employees $219,051 on average for the nine months, more than the $207,688 it set aside for each of the 57,726 employees a year earlier, figures released today show. The company doesnít disclose how many people work in institutional securities.


Morgan Stanleyís brokerage division employed 16,517 financial advisers at the end of September, up from 16,378 a year earlier. It set aside $6.12 billion for pay in the nine months, up from $5.89 billion a year earlier, according to figures in todayís report.

The unitís compensation cost, set by a fixed grid for some employees, was 58% of its revenue, compared with 61% a year earlier.

Goldman Sachs allocated 41% of revenue for employee pay in the first nine months, down from 44% for the same period of 2012. The $10.4 billion expense is enough to pay each of the New York-based firmís 32,600 employees $319,755 for the nine-month period.

Compensation for corporate and investment bankers at New York-based JPMorgan, the largest U.S. lender, represented 31% of the unitís revenue, compared with 34% in the year-earlier period.

The average compensation figures are derived by dividing the total compensation pool by the number of employees, and they donít represent individual workersí actual pay. Investment banks set aside revenue throughout the year for pay and typically decide bonuses at year-end.

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