Friday was a very good day for Morgan Stanley Chief Executive James Gorman. Oft-maligned in some circles, Gorman’s strategy of focusing less on risky trading and more on the firm's brokerage business paid off in the third quarter as Morgan Stanley posted higher revenue totals that rival Goldman Sachs, something it hadn’t done in over two years.
Like other Wall Street banks, Morgan Stanley’s fixed income revenue tanked – down 43% year-over-year – but the unit is much smaller than that of a Goldman Sachs, shielding the firm from major losses. Morgan Stanley made up for the drop with strong performances from its equities trading and wealth management units, helping the firm earn a profit of $888 million compared to a $1 billion loss in the same period a year earlier. Pre-tax profit margins within the all-important wealth management unit increased to 19% during Q3, up from 7% a year ago.
“The fruits of our strategy…were evident,” Gorman said. Indeed they were, although it’s important to remember this is just one quarter. An argument can be made that rival banks employing different strategies were at a disadvantage – one that likely won’t last – due to the Fed’s fickle behavior with ongoing bond purchases.
Still, credit Gorman with the foresight. Compensation for Morgan Stanley employees was up 1% from a year ago. During the same period, compensation at Goldman Sachs fell 44%.
Year’s Biggest Trading Gaffes (eFinancialCareers)
It’s been a banner year for trading errors. Big, headline-making trading mistakes seemingly occur every day. Many are small yet rather humiliating; others are simply devastating. We counted down the top flubs of the last year.
Brilliant in a Weird Way (Business Insider)
This is crazy. Goldman Sachs gives employees a 25% discount at its cafeteria if they purchase food before 11:30 a.m. or after 1:30 p.m. The idea is to incentivize people to eat at odd hours as to not create any lines during the lunch rush. Long lines means people are waiting, not working.
Dry Run (WSJ)
The New York Stock Exchange wants no part of another Facebook IPO nightmare. The exchange is setting aside Oct. 25 to allow trading firms to test their systems before the launch of Twitter’s initial public offering. Market participants apparently asked NYSE for the dry run.
‘The Cartel’ (Bloomberg)
Senior traders from Barclays, Citigroup and Royal Bank of Scotland are being investigated for manipulating the foreign-exchange market. Investigators are looking into an instant messaging group of traders who called themselves “The Cartel.”
No More Trophies (Financial News)
J.P. Morgan is apparently sick of taking bows, or at least sick of wasting the time spent needed to earn them. The bank has asked its clients to stop voting for major industry awards, claiming the pitch process is too time-consuming. A skeptic might also think it’s not a great time for J.P. Morgan to be publicly patting itself on the back.
Big Hurdle (eFinancialCareers)
The average hedge fund spends as much as 10% of its operating costs on compliance. It’s hampering smaller firms that are trying to get started.
Buzz Around the Office
Kid-Hating Dog (Arbroath)
A Norwegian liquor store has employed a dog to help sniff out underage customers who are trying to buy booze. If you get nervous, Tutta will know. Either that or she just hates kids.
List of the Day: Interview Red Flags
If your interviewer says any of these things, send your resume somewhere else.
- They talk bad about the company or their boss.
- They question why you want the role.
- They want you to say “yes” today.
(Source: The Daily Muse)