Morgan Stanley to frame a new portrait at the helm

Morgan Stanley CEO James Gorman (left) takes part in an interview with Economic Club of Washington president David Rubenstein in Washington on September 18, 2013. REUTERS / Yuri Gripas

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NEW YORK, Dec. 27 (Reuters Breakingviews) – When is the right time for a Wall Street titan to leave? Probably when the company’s fortunes are high and with a ready-to-cook successor. By this logic, James Gorman of Morgan Stanley (MS.N) will be the first of the longtime bank chiefs to go.

The Australian who has run the New York bank since 2010 has performed better than most of his rivals. Every dollar invested in Morgan Stanley then is worth more than $ 4 today, including dividends. That’s less than JPMorgan (JPM.N), but beats Goldman Sachs (GS.N), Citigroup (CN), Wells Fargo or Bank of America (BAC.N). Gorman’s peers are all new to it, like Citi’s Jane Fraser, or plan to stay, like BofA’s Brian Moynihan or JPMorgan’s Jamie Dimon.

Gorman has also gambled on wealth management while his peers have focused elsewhere, acquiring brokerage firm E * Trade Financial and asset manager Eaton Vance for $ 20 billion during the pandemic. Unlike banks with large loan companies, Morgan Stanley didn’t worry about defaults on consumer loans.

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Leaving when he’s early would be another way for the former McKinsey consultant to pull away from the pack – except that it’s not clear who will replace him. Gorman assigned new roles to four potential successors in May, all longtime senior lieutenants. Only wealth management boss Andy Saperstein and head of corporate securities Ted Pick, however, led Morgan Stanley’s main profit drivers, suggesting a two-horse race.

Since Morgan Stanley’s future lies in wealth – Gorman has said he wants to grow his clients’ assets to $ 10,000 billion, down from just over $ 6 trillion – Saperstein may seem like a good shot. Wealth could represent two-thirds of income if Gorman reaches his goal.

Pick has an advantage in other respects. He arranged the stock market after the crisis. The market branch he oversees has seen its share of the five major trading houses’ revenue drop from 13% to 18% over the past decade. While it wasn’t smooth – like hedge fund Archegos’ $ 1 billion in business losses in 2021 – Pick was also the highest-paid executive after Gorman according to an April filing, reflecting the fact that his division carries more risk than others.

One catch: Pick has never executed a brokerage before. Then again, Gorman will likely copy his predecessor, John Mack, and remain president for some time. It’s probably time for another reshuffle by then to fill in some gaps in his successor’s resume.

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(This is a Breakingviews prediction for 2022. To see more of our predictions, click .)

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Editing by Rob Cox and Amanda Gomez

Reuters Breakingviews is the world’s leading source for financial information on agenda making. As the Reuters brand for financial commentary, we dissect the big companies and economic stories from around the world every day. A global team of around 30 correspondents in New York, London, Hong Kong and other major cities provide real-time expert analysis.

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