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Wall Street ended last year promising to rein in excessive bonuses. So are the big firms living up to their promises in the first quarter of 2010?
Morgan Stanley, whose CEO James Gorman has expressly vowed to bring down the firm's compensation levels, reported this morning that its comp ratio fell to 49% from 68% a year ago.
Morgan's comp level remains the highest among the three largest, marquee investment banks that includes Goldman Sachs Group and J.P. Morgan Chase. But, Morgan's still elevated comp ratio, which measures salaries, bonuses and benefits as a percentage of total revenue, may be a little easier to stomach for shareholders since Morgan Stanley swung to a first quarter profit of $1.85 billion from the year-earlier loss of $17 billion.
Overall Morgan's comp doubled to $4.4 billion in the first quarter, as the firm beefed up its hiring of traders and financial advisers, through its joint venture with Citigroup's legacy Smith Barney brokerage. But its revenue increased thanks to a trading boom, helping to lower the comp ratio.
Goldman and J.P. Morgan, meantime, are vying for the last place in the comp charts. Goldman's first quarter comp ratio was 43% of net revenue for the first quarter of 2010, down from a 50% ratio a year ago. Goldman's first-quarter ratio is significantly higher than the 35.8% ratio that it ended 2009 with–-the lowest in the firm's high-paying history. Goldman cautions that its first quarter comp levels are no indication of where its actual bonuses will end up at the end of 2010.
J.P. Morgan takes the cake, though. The comp ratio in its investment banking division (which is best comparable to Goldman and Morgan Stanley) was 35% in the first quarter, which is down from 39% a year ago.
The real question is whether this restraint will be enough to satisfy regulators eager for political points scored at Wall Street’s expense. Will Washington use the latest comp levels to declare victory, or will it ask for more?
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in a word, no
Deal Journal is an up-to-the-minute take on the deals and deal makers that shape the landscape of Wall Street, including mergers and acquisitions, capital-raising, private equity and bankruptcy. In short, wherever money changes hands. Deal Journal is updated throughout each trading day with exclusive commentary, analysis, data, news flashes and profiles. The Wall Street Journal’s Michael Corkery is the lead writer, with contributions from other Journal reporters and editors. Send news items, comments and questions to deals@wsj.com.
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