Morgan Stanley ramped up its bankers’ salary pool to 72 per cent of its net revenues for the second quarter - despite posting an overall quarterly loss from continuing operations of $159 million - in a move which is raising eyebrows among industry commentators.

Having reported net revenues of $5.4 billion for the second quarter, Morgan Stanley said its compensation expenses for the period were $3.9 billion, compared with $3.1 billion for the previous year – an increase of 26 per cent.

The US bank’s second quarter loss for this year contrasts to income of $689 million for the same three months of 2008.

Last week it emerged that Goldman Sachs had set aside 49 per cent of its revenue - $6.65 billion - for staff compensation and benefits, a 1 per cent increase from a year before and a figure dwarfed by the allocation from rival Morgan Stanley.

Goldman Sachs, however, reported a net profit of $3.44 billion for the second quarter, up from $2.1 billion on 30 May last year, a figure that surpassed market expectations. Net revenue was $13.76 billion in the quarter, up from $9.42 billion from the same period of 2008, also beating forecasts.

Banks usually asign around 50 per cent of revenues to staff compensation – making Morgan Stanley’s assignment of 72 per cent a stand out figure. But for many within the financial services recruitment sector, the bank’s move is no surprise.

Speaking to WealthBriefing, Dudley Edmunds of Culliford Edmunds Associates, a London-based executive search firm, said: “All they’re doing is something we’ve seen US banks do before… they’re probably ahead of the game in terms of staff retention.”

According to Mr Edmunds, Morgan Stanley’s bumper remuneration pool makes “a lot of sense” in terms of addressing performance issues through the attraction and retention of high-quality staff. Presumably Morgan Stanley is rewarding staff who are performing, he said, adding that embracing staff in bad times is something that the US banks do best.

Echoing this point is Nick Dogilewski of executive search firm the Omerta Group, who notes that US institutions largely tend to be more aggressive on pay. This is not to suggest that increases to salary pools will be seen across the board however, said Mr Dogilewski. “Every bank will be different… it’s difficult to predict a norm for the market as some firms are very profitable at the moment, while others are struggling,” he said.

Morgan Stanley was unavailable for comment at the time of publication.