Morgan Stanley is the latest in a long line of investment banks that are paring back on bonuses this holiday season. The bank's Asia banker bonuses could be cut by as much as 50%, a new report from Reuters said this morning.
The conservative tone towards end-of-year paydays for bankers this year stands at stark odds with the record bonus paydays banks were distributing at end of year 2021.
As rates have risen, deal-making has slowed significantly, however. According to Reuters, discussions about bonuses are currently "underway" at the company globally. This means that U.S. and European arms of the bank could follow Asia's lead in cutting bonuses.
The slashing of bonuses means that overall compensation for bankers in Asia could drop by a stunning average of 30% - not the static job security anyone is looking for in an environment where CPI is at 8%.
Recall, just days ago we noted that Jefferies was also considering slashing bonuses.
Jefferies chief executive Rich Handler and president Brian Friedman penned a memo that went out to employees last week, claiming that due to the bank's aggressive hiring over the last 3 years, in combination with slumping deals, that bonuses would come in lighter than normal.
The letter said: "As always, we will do the right thing for the long-term success of everyone at Jefferies and to continuously invest in our people and our firm, so we can continue to build and prosper. Let’s just spell it out here: 'This is going to be a more difficult compensation season at Jefferies, just like it will be for every firm in our industry.'"
It continued: "2019 was a decent year for Jefferies and our industry. Despite Covid, 2020 was a very good year and we all know 2021 was the type of year that comes along very rarely in a finance professional’s career."
"The firm has made major investments across the board that have allowed us to gain credible market positions that make us more excited about our strategic direction than ever," the letter says, before delivering the news no one wants to hear during the holiday season.
"But the trade-off for the enhanced research, supercharged technology investment, critical hires for future growth, and expanded global footprint, is that there are many more of us driving our growth, success, and sustainability than we had back in 2019," the letter adds.
It concluded: "It is also clear that if we are all committed to being together as much as possible in the office, we should also have the ability to selectively and appropriately work from home and have the life flexibility that so many of us need and deserve."
As we wrote about and covered extensively last year, bonuses in investment banking reached levels only attained prior to the 2008 financial crisis in 2021.
And it doesn't look like Jefferies and Morgan Stanley are going to be alone this year - Bloomberg noted that analysis by Johnson Associates concluded that "dealmakers working in equity and debt capital markets units are set for a 45% decline in bonuses".