Last week, it was reported that Wall Street bonuses could be off as much as 30%. That appears to be the norm industrywide for bank stocks — but some top management at Morgan Stanley (NYSE:MS) will be getting a much bigger haircut. Top brass at the investment bank, including Chief Executive Officer James Gorman, won’t get any immediate cash and will defer their compensation.
Morgan Stanley hasn’t been eager to go on the record about things, with rumors popping up in both the Wall Street Journal and Bloomberg. But it’s no surprise. A difficult environment for Wall Street due to the euro zone debt crisis and persistent economic troubles at home continue to hurt financial stocks. That’s to say nothing of the recent regulations in the wake of the financial crisis.
Don’t weep for Morgan Stanley staffers, however. Some folks are indeed getting bonuses – with cash payouts capped at a paltry $125,000, according to sources. And top executives may not get anything now, but they will assuredly get their 2011 paydays eventually. It could be later in this year or it could be early next year, according to reports.
Top banks like Morgan Stanley, Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), Citigroup (NYSE:C) and JP Morgan Chase (NYSE:JPM) are indeed hurting, as recent bank earnings have indicated. But are they really hurting this much? Or is this just a bit of theater from an industry that needs to repair its image?
Maybe the reduction in bonuses just a political move, to make it look like richly compensated bankers are cognizant of the growing backlash against the “wealthiest 1%.” That would be a big about-face, considering JP Morgan CEO Jaime Dimon thinks fat cat CEOs need a tax break.
But it is an election year, after all. And even fiscal conservatives seem to be ready to engage in class warfare, judging by how other candidates have attacked frontrunner Mitt Romney as a “crony capitalist” during primary contests. Maybe this is a sign that financial companies are willing to keep their heads down for a while to avoid public outcry.
If you’re an investor owning bank stocks, you had better hope this political maneuvering is the culprit – not a real need to keep cutting back . Because if banks continue to cut back on staff and bonuses but still post dismal earnings, it’s a sign that there is a heck of a lot more pain to come in the financial sector before these stocks are in favor again.