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Morgan Stanley increased bonus spending in the fourth quarter

It’s Q4 reporting season, and it seems like Morgan Stanley is starting to reward its investment bankers and traders – however many of them are left, anyway.

The bank’s Q4 results note that an increase in compensation from a year ago reflected “higher discretionary compensation” (bonuses), as well as “significantly lower severance costs” related to “an employee action” a year ago.

The full-year notes, however, suggest some optimism; whilst deferred equity compensation was down, there were “higher expenses related to DCP [deferred cash-based compensation] and stock-based compensation plans.” In layman’s terms, the bonus pool was topped up and then some – compared to 2022, at least.

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What does that translate to? The bank doesn’t break out headcount by division, but compensation in the Institutional Securities group increased by a relatively minor 1.5%. However, given that the Institutional Securities group was trimmed pretty significantly earlier this year (the 5,500-strong group was the primary target of the 3,000 job cuts), it might be a good sign for whoever’s left.

All in all, the bank had a pretty rotten 2023. Fixed Income, Currencies, and Commodities (FICC) trading revenues were down by 15% on 2022, compared to relative resilience from competitors such as BofA, which saw a 10% increase. Equities trading revenues were down 7%, although most banks’ revenues were also down. M&A revenue was down 24%, the worst of the field surveyed so far (the major American banks).

Q4 was less extreme, with FICC, equities, M&A, and ECM revenues all within 1.3% of figures from Q4 of 2022. The only exception was DCM revenue, which was up by nearly a quarter - still less than the increases seen at Citi and Bank of America, but better than JPMorgan’s increase.

Goldman Sachs also reported its results day. It cut spending on compensation by 4% year-on-year in the final quarter, which is when bonuses are typically accrued. 

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AUTHORZeno Toulon

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