NEW YORK (BLOOMBERG) - 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 per cent 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 to employees 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.
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 per cent, 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 per cent to US$6.08 billion (S$8.71 billion) during the first nine months of 2016. Citigroup, Goldman Sachs Group and Bank of America all suffered drops of 12 per cent to 14 per cent in that business, while the biggest European investment banks all reported declines of more than 20 per cent on a US dollar basis.
JPMorgan Chase posted the smallest decrease, about 1 per cent.
"Morgan Stanley and other US 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 per cent in the first nine months of 2016, as revenue dropped 12 per cent. The bank 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 firm's trading in October 2015. Last year, Mr 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.