Bank Spotlight: JPMorgan Slashes CEO’s Bonus, Goldman Earnings Triple, and Morgan Stanley Makes Cuts
Morgan Stanley (NYSE:MS): Current Price $20.66
Changes prompted by new stringent U.S. banking regulations, designed to curb excessive risk taking by financial institutions, have already begun to play a role in the structure of Morgan Stanley, the nation’s sixth largest bank by assets. Sources familiar with the matter told Reuters on Wednesday that the bank plans to cut 1,600 jobs as part of an effort to reassess its businesses.
In addition, Morgan Stanley has laid off two vice presidents and one or two other employees in its commodities division in an attempt to reduce expenses. As the publication reported, the staff-reduction decision followed the bank’s announcement that it would continue its fixed income, currency, and commodities trading business, termed “FICC” by Wall Street, and work to increase market share in that operation by 2 percentage points.
“Banks need to stay nimble, especially with regard to their commodities operations given reduced market liquidity and heightened cost structures,” a source told Reuters.
JPMorgan Chase (NYSE:JPM): Current Price $45.84
Even though JPMorgan Chase reported that fourth-quarter income grew 53 percent and 2012 earnings set an all-time record, Chief Executive Officer Jamie Dimon will see his bonus cut in half because of the $6.2 billion loss the bank sustained as a result of the “London Whale” trader Bruno Iksil.
“As chief executive officer, Mr. Dimon bears ultimate responsibility for the failures that led to the losses in the Chief Investment Office,” the bank said in a securities filing seen by Reuters. The report issued by the bank’s management task force blamed the trading losses, which came primarily in the second quarter of 2012, on three executives working below Dimon: the former chief investment officer Ina Drew, the former risk chief Barry Zubrow, and the former chief financial officer Douglas Braunstein. While not directly responsible, the board stated that Dimon did not properly oversee the trades.
The filing showed that Dimon was paid a salary of $1.5 million and a bonus of $10 million in 2012. His compensation in 2011 included the same salary and a bonus of $21.5 million.
Goldman Sachs (NYSE:GS): Current Price $139.21
Thanks to lower compensation expenses, gains in stock and bond values, and improved revenue from dealmaking, Goldman Sachs said Wednesday that fourth-quarter earnings almost tripled.
The fifth-largest U.S. bank by assets reported earnings of $2.8 billion, or $5.60 per share, an increase from $978 million, or $1.84 per share, in the same quarter last year. Analysts had expected much lower results, and following the earnings release shares gained more than two percent, trading at $139.21 just after 9:30 a.m Eastern Standard Time.
Revenue spiked significantly in Goldman Sachs’ bond-trading business, and its investing and lending unit saw revenue grow to nearly $2 billion. But gains were not limited to those two divisions; revenue rose in all of the firm’s business operations and overall revenue increased 53 percent from $6 billion in the fourth quarter of 2011 to $9.2 billion this quarter.
Investing Insights: Goldman Sachs Earnings: First Year of Revenue Growth Since 2009.