Morgan Stanley cuts pay for bankers and traders as profits slide
JPMorgan may seem to have increased bonuses in its corporate and investment bank in the third quarter, but today's results from Morgan Stanley suggest that similar generosity may not be extended elsewhere.
Morgan Stanley's spending on compensation in its institutional clients unit (investment bank) fell 13% year-on-year in the third quarter and is down 15% for the year as a whole.
By comparison, JPMorgan hiked compensation spending in its investment bank by 17% y-o-y in third quarter.
The chart below shows the two banks' comparative performance in the first nine months of 2022. Despite Morgan Stanley's apparent lack of generosity, it outperformed JPMorgan in M&A advisory, fixed income sales and trading and equities sales and trading when this year's revenues for the first three quarters are compared to last year's
Morgan Stanley's fixed income sales and traders did especially well in the third quarter, with a 33% year-on-year revenue increase versus a far more feeble rise at Citi. The bank said the increase reflected, "strength in macro products on high client engagement and volatility in the markets."
With compensation spending falling, the implication is that Morgan Stanley's macro traders may not be rewarded for their efforts. Profits at the institutional clients business fell 43% year-on-year in the third quarter, and were down 32% year-on-year in the first nine months as a whole.
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