Brexit threatens bonuses at Goldman, Morgan Stanley and rest of Wall Street
In just the past two days, bank stock prices have fallen.
In early 2014, Morgan Stanley awarded about $1.4 billion worth of shares to employees on the condition that they couldn’t sell them until early 2017. No doubt the firm’s bankers and traders appreciated the gesture, but in hindsight they probably would have preferred cash. The value of the grant has sunk to less than $1 billion as Morgan Stanley’s stock price got clobbered the last two days after the Brexit vote.
It’s the same story across Wall Street. A Goldman Sachs share grant to employees valued at about $750 million two years ago is today worth about $670 million. A Bank of America grant worth about $35 million is now worth about $25 million.
The declines are significant because the lion’s share of Wall Street bonuses these days are paid in deferred stock, rather than cash. Typically, deferred shares account for 75% of bonus pay and in most cases the lucky recipients aren’t allowed to sell the stock for three years.
This system was made for quite lucrative bonuses as bank stocks recovered from their post-crisis lows. But 2016 was a tough year for a lot of banks even before last week’s Brexit vote. In just the past two days, Morgan Stanley’s stock price has fallen by 14% and BofA by 13%. Goldman is down by 9%.
Bankers aren’t going to get much sympathy over falling bonuses. Still, the city and state both rely heavily on Wall Street pay for tax revenues. The money also flows into real estate, restaurants and supports numerous other jobs throughout the city.