ANALYSIS-Broker pay at three biggest U.S. firms about equal

* Biggest U.S. brokerage firms all coping with integration

* Single quarter may not reflect full-year payouts

CHARLOTTE, N.C., Oct 22 - In the third quarter, it didn't matter which major brokerage you worked for, you were likely to earn about the same at any of them.

Despite fierce competition for talent, Bank of America Corp's Merrill Lynch unit, Wells Fargo & Co and Morgan Stanley all set aside about the same amount for each of their retail brokers in the quarter -- a little less than $110,000.

The figures are estimates for a single quarter. At the end of the year, the three largest U.S. wealth management units may diverge wildly in terms of how much they pay brokers.

But if the third quarter is representative, Merrill Lynch brokers, traditionally the most productive in the industry and therefore the best paid, may be losing ground to rivals at Wells Fargo and Morgan Stanley Smith Barney.

Or it may be that all three companies are tied up with merger integration -- Bank of America acquired Merrill Lynch, Wells Fargo acquired Wachovia, and Morgan Stanley bought a controlling stake in Citigroup Inc's Smith Barney business. Integration may be hurting all three, and over time one may emerge as the winner.

Adding to the complications, Swiss bank UBS is reported to be hiring former Merrill Lynch brokerage head Robert McCann, and could look to build that business to rival the other three.

Broker pay, included under "noninterest expense" when reported each quarter, is tightly tied to the success of the business in the long term, analysts said. Paradoxically, the higher this expense is, the higher the chance that the unit is enjoying success.

"Generally, as you see noninterest expense increase, it's a great sign for the business," said Doug Danemiller, a Boston-based analyst with Aite Group. "Its a figure that's watched so closely. When you see it go up, it's a sign the firm is seeing a much greater corresponding spike in revenue."

Among the big three, only Morgan Stanley breaks out its compensation expense for its retail brokers -- $1.943 billion for the third quarter, or about 70 percent of its noninterest expense in the period. That amounts to about $108,000 per broker for the quarter.

Assuming Wells Fargo and Bank of America also pay out about 70 percent of their noninterest expense as compensation, Wells Fargo set aside a little less than $107,000 per broker, and Bank of America a little less than $108,000.

Morgan Stanley's wealth management revenue so far this year totals $6.2 billion, Wells Fargo's $8.5 billion, and Bank of America's $12 billion.

INTEGRATION

As brokerages go through integration, pay has become a central, and sometimes controversial, issue in retaining brokers.

Much attention has been paid to Bank of America Merrill Lynch's employee departures in the first half of the year, including high-profile brokerage teams and executives. The bank said overall departures have largely been stanched, with the brokerage force stabilizing at 14,797 employees. It is now the third-largest brokerage in the United States, but it may be the least hobbled by integration, because Bank of America's retail brokerage force was tiny compared with Merrill Lynch's.

Wells Fargo is the nation's second-largest brokerage with 15,143 advisers. It is integrating A.G. Edwards and several other smaller deals the former Wachovia Corp completed in the year prior to its distressed sale.

Morgan Stanley Smith Barney is the largest brokerage when ranked by employees, with more than 18,000 financial advisers. Morgan Stanley lost 300 brokers during the third quarter, and combining two very large brokerage businesses could make integration messy.

"There's still a lot of uncertainty as to how the competition is shaping up," said Danemiller. "You're looking at the three dominant companies with three really different stories right now."