Wall Street investment bank Morgan Stanley said
it would pay a smaller portion of revenue in bonuses to its bankers and traders
this year even in a better revenue environment. The bank reported a drop in
fourth-quarter adjusted earnings, missing estimates, as it deferred fewer bonus
payouts and unexpected market swings hit its division that trades bonds, currencies and commodities.
In the past, Morgan Stanley has deferred up to 80
percent of its bonuses. But it said last month it would pay more up front
because it was on a stronger financial footing and in a better position to
bring its practices into line with rivals. Morgan Stanley said on Tuesday it
would pay 39 percent or less of revenue from its institutional securities
business to employees in 2015. Chief Executive James Gorman said in June the
ratio would be 40 percent or less.
Compensation expenses rose to $5.1 billion from $4.0
billion, with about 41 percent of revenue from the bank's institutional
securities business going into bonuses. While not strictly comparable, arch
rival Goldman Sachs Group Inc paid out 36.8 percent.
Choppy markets caused by factors ranging from plunging oil
prices to political upheaval inGreece, sent investors scurrying last month,
slashing the trading revenue of U.S. banks. Morgan Stanley had a
"very challenging" quarter in commodities because of the
decline in oil prices, Chief Financial Officer Ruth Porat told Reuters.
Morgan Stanley has been shrinking its presence in the
bond market as tougher capital requirements take hold, and the bank has said it
is now more focused on returns than revenue. But its adjusted average
return-on-equity fell to 4.5 percent in the quarter, below the 10 percent minimum
Gorman wants.
Revenue from the bank's increasingly important wealth
management business rose 2.4 percent to $3.80 billion. But the pretax profit
margin of 19 percent including adjustments was below the 20 percent Gorman has
set as a minimum.
Advisory revenue increased 8.2 percent to $488 million,
while legal expenses fell to $284 million from $1.4 billion. Overall, earnings
attributable to common shareholders rose to $920 million, or 47 cents per
share, from $36 million, or 2 cents per share, a year earlier.
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