Thursday, January 20, 2011

Morgan Stanley awards staff $16bn as profits triple

• Morgan Stanley insists it fundamentally restructured pay policy
• Wall Street bank's annual profit jumps from $1.3bn to $4.5bn
• 51% of revenue set aside for pay, down from 62%

  • Article history
  • Morgan Stanley
    Morgan Stanley enjoyed a 30%-plus rise in revenues and a big jump in profits. Photograph: Seth Wenig/AP

    Pay and bonuses at Morgan Stanley have risen by 8.5% to an average $255,000 (£160,000) per employee after the Wall Street firm set aside $16bn to pay bonuses, salaries and benefits in 2010.

    Profits at the bank, a close rival of Goldman Sachs, more than tripled to $4.5bn in 2010 as against $1.3bn for 2009. Revenue, out of which bonuses are paid, rose 35% to $31.6bn, although that figure fell short of expectations after trading revenue was lower than predicted. Even so, Morgan Stanley shares were up in pre-market trading.

    James Gorman, the chief executive, who last year refused to take a cash bonus, opting for a payout in shares instead, said he was "pleased with progress".

    "But there is a great deal of work to do across Morgan Stanley's global franchise as we look to deliver first-class service to our clients and long-term value to our shareholders and employees," Gorman added.

    Morgan Stanley is reporting a day after Goldman Sachs was accused of "sticking two fingers up to austerity Britain" by handing its staff a $15.3bn pay and bonus pool – an average of $430,000 per employee.

    Analysts said that Morgan Stanley's average pay of $255,000 was difficult to compare with the $235,000 average it paid in 2009 as the earlier figures did not include a full year of the Smith Barney wealth management firm, a joint venture with Citigroup. The bank showed a $1.7bn rise in compensation costs at its wealth management business – largely Smith Barney – so if this is excluded the average pay and bonus award in 2010 is $224,000, a drop on 2009.

    The firm is said to have been warning staff internally that bonuses would be lower this year and stressed that it had "fundamentally restructured" the way it pays its 62,540 staff. For the 2010 bonus round, which will begin in coming days, it has increased the amount of a bonus that is subject to deferral from 40% to 60%. For the most senior staff sitting on the operating committee, that proportion is increased to more than 80% from 75%.

    Some 51% of revenues are being set aside to pay staff in 2010, down from 62% in 2009.

    The firm, which employs approximately 7,000 in the City, incurred a $242m charge for former chancellor Alistair Darling's one-off bonus tax, which was levied on bonuses over £25,000 until April last year.

    Like Goldman Sachs, Morgan Stanley suffered a drop in its trading revenues in the fourth quarter but its retail brokerage operations offset this fall.

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