Two people with firsthand knowledge of Morgan Stanley’s intentions claimed the Wall Street firm would cut investment bankers’ Asia bonuses by as much as 50% to combat adverse market circumstances that have hurt income.
The sources said Morgan Stanley’s U.S. and European units could follow Asia’s reduction, which contrasted with 2021 when its top bankers received up to 20% greater incentives globally.
They stated Morgan Stanley is discussing bonus payouts globally. A third source claimed the bank’s Asia incentive cuts would average 30% for all investment banking teams and markets.
The first two sources stated the lowered bonuses might lower Asian bankers’ salaries by 30%. This is the first time the U.S. bank has revealed its expected 2022 incentive cuts.
Bankers receive hefty bonuses based on business unit and individual performance. Morgan Stanley did not comment on bonus distributions. The sources requested anonymity because the information is confidential.
Due to increasing interest rates and a short, shallow recession in the U.S., many banks are halting dealmaking.
After making record profits last year advising on mergers, acquisitions, and initial public offerings as COVID-19 limitations lifted, investment banks face pressure on earnings.
In a competitive economic environment, Morgan Stanley’s biggest rivals likewise lower bonuses.
On Thursday, Semafor reported that Goldman Sachs Group’s senior employee bonus pool might drop by half, citing sources.
According to Bloomberg Law, Citigroup Inc. and Bank of America Corp. may slash bonus pools by 30%.
Johnson Associates Inc., a New York compensation expert, predicted last month that Wall Street investment bankers would receive lesser bonuses this year as the economy slows.
Wall Street banks begin compensation and performance conversations in December and finalize incentive pools by year-end.
Morgan Stanley’s compensation will fall most in Asia’s capital markets divisions, which are more vulnerable to global financial market volatility.
After Morgan Stanley CEO James Gorman announced “modest job cuts” worldwide earlier this month, this year’s bonus discussions are underway.
Last week, Reuters reported that the bank had slashed approximately 1,600 jobs or 2%.
The first two sources reported 50 Asian investment banking job cuts this year. However, one said that Morgan Stanley’s onshore and offshore China teams made over 90% of those savings.
Asian capital markets and mergers and acquisitions have suffered from China’s COVID-19 limitations and U.S. regulatory scrutiny of Chinese enterprises.
MSCI’s Asia-Pacific ex-Japan index dropped 18% this year. According to Refinitiv statistics, Hong Kong IPOs, a crucial revenue source for regional international banks, were at a decade-low in 2022.
As worldwide dealmaking slowed, Morgan Stanley’s third-quarter profit fell 30%, missing analysts estimates.
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