Morgan Stanley results contain some sorry truths for its bankers
It's results season for US banks and afterCiti, JPMorgan and Goldman, today we have Bank of America and Morgan Stanley.
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As the chart below shows, Morgan Stanley's results have a few things in common with everyone else's. Its first quarter was marked by a massive increase in equity and debt capital markets revenues. However, Morgan Stanley's M&A bankers did worse than rivals and its equities and fixed income salespeople and traders had a so-so quarter, particularly compared to Goldman Sachs (fixed income) and Bank of America (equities).
The most notable revelation from Morgan Stanley's first quarter results, though, is that — like Goldman — it is doing more with less. And as profits increase, it's not sharing the recovery equally with its employees.
Today's results reveal that Morgan Stanley cut spending on compensation in its institutional securities business by 1% year-on-year in the first quarter, even though net income in the unit rose by 24% over the period.
In the presentation accompanying its results, Morgan Stanley said that falling compensation spending in the institutional securities division was the result of lower stock-based compensation and lower headcount. The bank doesn't break out employees in institutional securities specifically, but across the bank as a whole, headcount was down 2,656 people year-on-year (a fall of 3%) and by nearly 400 people in the first quarter.
The implication is that even as revenues and profits return, Morgan Stanley is still squeezing costs. It may be doing so in some regions more than others: revenues in APAC were down 12% year-on-year in Q1; in America, they were up 7%.
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