Now that all of the major U.S. banks have reported, it’s time to highlight a tiny little metric that means everything to bankers — compensation.
Specifically, we’d like to point out a little change in the game (read: rivalry) between Morgan Stanley and Goldman Sachs. Up until last quarter, when Morgan absolutely crushed the rest of the Street in terms of earnings, Goldman basically had an undisputed leg up.
I mean — it’s Goldman Sachs.
This quarter, neither bank reported particularly great earnings. Goldman’s Q4 net income fell 19% from the same time last year, despite the fact that the bank beat analyst estimates. Morgan Stanley beat too, but with a load of noise.
So when Morgan and Goldman bankers tuck themselves in tonight, it’s likely they won’t be thinking about which bank racked up the best numbers in terms of profit.
They’ll be thinking about the fact that compensation at Goldman Sachs fell 3% to 12.6 billion from Q4 2012 to Q4 2013, while the bank increased its staff by 2%. Meanwhile, at Morgan Stanley compensation expense is up from $US3.6 billion in Q4 2012 to $US4.0 billion in Q4 2013.
Obviously this is important because a lot of people go into banking for the pay, but it’s also an important sign of how the bank is doing. This is simple stuff. Goldman is tightening its belt while Morgan is paying its employees more, especially in its Wealth Management business — which some on Wall Street think is a total snooze — where compensation increased from $US1.9 billion in Q4 2012 to $US2.1 billion in Q4 2013.
Now, it’s worth pointing out that Goldman’s earnings report says that compensation was reduced to fund a charitable venture called Goldman Sachs Gives, which cost employees about $US155 million.
They’ll survive, though.