Morgan Stanley and Bank of America Merrill Lynch have reported their fourth quarter results and full year results for 2015. The follow last week’s revelations from Citi and J.P. Morgan. Needless to say, Morgan Stanley’s fixed income sales and trading results have particular resonance in light of the bank’s decision to place equities traders in charge of the fixed income business and to make 25% of its fixed income professionals – including people it only recently hired – redundant.
Today’s results suggest that Morgan Stanley’s traders – in both equities and fixed income – are the best among the banks that have reported so far. They also suggest that bonuses for Morgan Stanley’s traders and its investment bankers could be fairly abysmal this year.
This is what you need to know.
1. Morgan Stanley’s traders performed the best in 2015. J.P. Morgan’s fixed income traders and BAML’s equities traders performed the worst
* Morgan Stanley’s fixed income figures reflect a $466m accounting charge which reduced FICC revenues in Q4 2014. BAML’s figures are ex-DVA.
2. But Morgan Stanley’s fixed income traders had a disastrous final quarter as redundancies kicked in
* Morgan Stanley’s fixed income figures reflect a $466m accounting charge which reduced FICC revenues in Q4 2014. BAML’s figures are ex-DVA.
3. In future, people working across Morgan Stanley’s investment bank will be paid a lower proportion of their revenues than anyone else in the firm
4. And compensation in Morgan Stanley’s Institutional Securities business (investment bank) has been hammered
Compensation and benefits expense in Morgan Stanley’s investment bank fell 50% in the final quarter compared to the same quarter of 2014. For full year 2015, it fell by 17%.
OK, Morgan Stanley is getting rid of 2,500 people in fixed income roles, but headcount across the bank’s institutional securities division totals in excess of 20,000. Something very bad is clearly afoot with Morgan Stanley bonuses.
Bank of America Merrill Lynch doesn’t break out pay in its global markets or global banking divisions, unfortunately.
Related articles:
Who’s winning in equities: Citi or J.P.Morgan?Both Citi and J.P. Morgan are investing in their equities team. Is it paying off?
Any fixed income traders leaving Goldman Sachs might want to join J.P. MorganGoldman Sachs has changed its mind about fixed income. J.P. Morgan has not - yet.
Morgan Stanley’s layoffs include traders it only recently hired and promotedMorgan Stanley's job cuts in fixed income have started at managing director level.
Photo credit: Winner by DAVID MELCHOR DIAZ is licensed under CC BY 2.0.