Yahoo Finance Morgan Stanley's (MS) James Gorman Announces Retirement in 2023
Morgan Stanley’s MS James Gorman is set to step down as the CEO within the next 12 months.
At the annual shareholder meeting on Friday, Gorman said, “The specific timing of the CEO transition has not been determined, but it is the board’s and my expectation that it will occur at some point in the next 12 months.”
Gorman replaced John Mack as the CEO of MS in 2010. Since then, he has been the bank’s co-president in charge of global wealth management, investment management and operations. He became chairman in 2012.
During his 13-year stay at the bank, Gorman overhauled the bank into a wealth management giant after it almost collapsed during the global financial crisis in 2008.
While Gorman did not name his likely successors, he said that the board has “identified three very strong senior internal candidates for consideration as the next CEO.”
Gorman informed that he would assume the role of executive chairman for “a period of time” to help Morgan Stanley transition to its next era of leadership.
Our Take
Under Gorman’s leadership, the bank has been focusing more on the Wealth Management (“WM”) and Investment Management (“IM”) segments, as they are less dependent on the volatile nature of the capital markets.
The acquisitions of online broker E*Trade Financial for $13 billion in 2010 and the $7-billion purchase of Eaton Vance Corp in 2021 have been steps in this direction. Driven by such efforts, these segments’ aggregate contribution to net revenues jumped to almost 55% in 2022 from 26% in 2010.
Also, the WM segment’s total client assets witnessed a three-year (2020-2022) compound annual growth rate (CAGR) of 2.3%, while the IM segment’s total assets under management saw a CAGR of 29.3% over the same period.
However, the performance of Morgan Stanley’s Institutional Securities (“IS”) segment, mainly constituting the trading and investment banking (“IB”) businesses, has not been impressive of late. In 2020 and 2021, both businesses witnessed solid growth, aided by the coronavirus outbreak-induced market volatility and higher client activities.
However, as markets began to normalize gradually, and several geopolitical and macroeconomic factors weighed on it, the segment’s performance was disappointing in 2022, mainly on subdued IB business. With the current global economic and geopolitical environment continuing to be influenced by elevated inflation, higher rates, worsening macroeconomic outlook and volatility across the global financial markets, the future performance of the segment remains uncertain.
Thus, the persistent slowdown in the IB business has led MS to consider cutting around 7% of jobs in the Asia-Pacific region (excluding Japan). This is part of the broader 3,000 IB job cuts the company announced recently.
Of the total cuts, China is likely to take the biggest hit, as slowing economic growth in the country is curbing deal-making. Last year, the company had slashed roughly 50 IB jobs in the Asia-Pacific region, with a large number being China-focused positions.
Over the past six months, shares of MS have lost 8.5% compared with the industry’s decline of 18.2%.
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Currently, Morgan Stanley carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Competitive Environment
Morgan Stanley is not the only one that is trimming its workforce. Many other Wall Street firms, including Bank of America BAC and Citigroup C, have been taking similar steps in their IB and wealth management divisions.
This March, Citigroup initiated a round of job cuts, slashing hundreds of jobs across the firm, which accounted for less than 1% of its total workforce. Per people familiar with the matter, who asked not to be identified, the company’s IB division, its operations and technology organization, and the U.S. mortgage-underwriting division were among those affected.
In its IB division, Citigroup was struggling because of the industry-wide slowdown in deal-making. In its mortgage division, the company was grappling with reduced mortgage demand because of rising prices and a rapid increase in mortgage rates.
Similarly, in February, it was reported that Bank of America was planning to cut jobs in its investment bank. The cuts are expected to have affected less than 200 bankers globally.
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