Having had time to digest its results and read the transcript to its conference call over the weekend, we would like to make a pronouncement: Morgan Stanley will not be paying its investment bankers at all well this year.
Yes, it's paying more across the bank as a whole, but the compensation pot in the investment bank specifically, is down.
It's down 2% before the UK bonus tax is taken into consideration and down 5.5% afterwards. At JPMorgan's investment bank and at Goldman Sachs, the overall compensation bill was up.
Morgan Stanley doesn't break out headcount in its investment bank, so it's impossible to calculate pay per head. But its comp bill is down despite the fact that, in the words of James Gorman, Morgan Stanley "hired a lot of very senior people...a lot of MDs," last year.
The implication is that pay per head could be down a lot.
After hitting a bank-wide compensation ratio of 62% of revenue in 2009, Morgan Stanley was under pressure to trim its pay in 2010. Across the company, the compensation ratio fell to 51%. In institutional securities (the investment bank), it fell to 42%.
Conclusion: under the new retail brokerage model of Morgan Stanley, investment bankers not on guarantees are being squeezed, heavily.
This isn't totally unsurprising - last year, Gorman reputedly warned that traders' bonuses would fall 30%.
However, Morgan Stanley bankers have something else to contend with. For a US bank, they are also having an abnormally large proportion of their bonuses deferred. Cue indignation, disgruntlement and threats to move elsewhere.