Morgan Stanley clung to a narrow profit in the third quarter, defying suggestions that the investment bank would be hurt severely by its exposure to the eurozone and the near-freeze on corporate activity, the FT reports. Reporting a net profit of $2.2bn, James Gorman, chief executive, said Morgan Stanley had “effectively navigated turbulent markets”. He could reinvent the business – or shrink it – if the tougher operating environment persisted. Underlying profit was much lower. The headline results – like other Wall Street groups – were flattered heavily by an accounting treatment that makes banks book a gain on the fall in value of their own debt, as FT Alphaville writes. In spite of market rumours, the bank said there had been no significant outflow of hedge fund cash from its prime brokerage and that it had built a liquidity pool of $180bn to rely on if funding markets seized up. It even bought back $2bn of its own debt to take advantage of the decline in value.
Bank of America chief executive Brian Moynihan said he is confident the bank can withstand any fallout from the European sovereign debt crisis, even if it hurts the US, Bloomberg reports. “That contagion stuff is real,” Mr Moynihan said during an event in Washington on Wednesday. “It wouldn’t be good for the American economy to have an economy that represents one third of the world stay in the condition it’s in.” “We feel confident” that the company can weather Europe’s turmoil, he said. “The amount of liquidity in the American system, the way we are situated is far different” than in Europe. Meanwhile, Morgan Stanley executives are working behind the scenes to soothe any possible jitters by showing how much the prime-brokerage unit has been retooled since the financial crisis, the WSJ says, citing people familiar with the matter. Company officials, including chief executive James Gorman, also have been telling hedge funds that the recent surge in the cost of protecting against a default by the firm has no direct impact on the prime-brokerage business.
Today in cognitive dissonance, with a hat tip to the gang at Deal Journal:
October 3, 2011 To: All Employees From: James Gorman Subject: A Message from James Gorman Read more
John Mack, the Wall Street veteran who led Morgan Stanley through the financial crisis, is stepping down as chairman as part of a planned succession that will put James Gorman, chief executive, at the helm of the investment bank’s board. The FT reports Mr Gorman took over as chief executive at the end of 2009 and Mr Mack remained chairman in a two-year power sharing agreement. Mr Gorman will assume the role of chairman on January 1 2012.
Morgan Stanley’s chief executive James Gorman has defended his decision to defer a larger portion of bonuses for employees than ever before, telling staff the bank had to strike a balance between their interests and those of shareholders, the FT reports. Morgan Stanley said last week that an average of 60 per cent of 2010 bonuses would be distributed in stock or cash over the next three years, up from 40 per cent a year earlier. Senior managers have expressed concerns at the ratio, citing effects on bank employees who receive lower pay-outs than traders. While Morgan Stanley is pre-empting new regulations on bonuses, its move is unique on Wall Street. “We are all asking: is this the new norm?” said another senior employee. “Because if it is, we will be looking to move.”
James Gorman has defended his decision to defer a larger portion of bonuses for Morgan Stanley employees than ever before, telling staff the bank must strike a balance between their interests and those of shareholders, reports the FT. Speaking at a company forum at the bank’s New York headquarters on Monday, Gorman told staff, “It’s just pretty simple: we have to make sure our shareholders make money at the same time.” Morgan Stanley said last week that an average of 60% of 2010 bonuses would be distributed in stock or cash over the next three years, up from 40% a year earlier, pre-empting steps by European and US regulators to cap immediate pay-outs.
James Gorman, chief executive of Morgan Stanley, continued to reshape the bank’s upper echelons with a shuffling of top executives, the FT reports. The moves, discussed in a memo sent to employees on Thursday, include an expansion of duties for Colm Kelleher, the co-president of institutional securities. Mr. Kelleher will relocate from New York to London, where he will assume responsibility for Europe, the Middle East and Asia, excluding Japan.
James Gorman, Morgan Stanley’s chief executive, on Tuesday told shareholders he was “unambiguously” in charge of the Wall Street bank, and rebuffed suggestions that John Mack’s role as chairman diluted his powers, reports the FT. At the bank’s annual meeting, Mack, who preceded Gorman as CEO and became chairman in January, vowed to step down if his successor felt his presence hindered his ability to run the company. The exchange highlights some investors’ concerns about the structure of the bank’s top echelons after Gorman’s took over the top job in January.
After all the hoohah and wild reports about $100m pay-outs, Goldman Sachs on Friday made a big move against the backlash over its compensation practices, saying it would award chief executive Lloyd Blankfein a mere $9m stock bonus for 2009, far lower than his payouts in the boom years preceding the financial crisis.
In fact, Blankfein’s payout marks a painful 87 per cent drop from the $68m he received in cash, stock and options two years ago. That 2007 bonus stands as a record for a chief executive at a publicly traded Wall Street bank. Read more
James Gorman, who will succeed John Mack as chief executive of Morgan Stanley next month, on Tuesday unveiled management changes that reflect the bank’s push to close the gap with its arch-rival, Goldman Sachs. With few exceptions, Mack’s top loyalists will remain in vital, or even bigger, roles. Colm Kelleher, chief financial officer, will become co-president of the bank’s institutional securities arm, along with Paul Taubman, global head of investment banking. Ruth Porat, an investment banker, will succeed Kelleher as CFO. Thomas Nides, chief administrative officer and a close Mack ally, will take on the extra title of COO.
Morgan Stanley’s James Gorman, who will succeed John Mack next month as the bank’s chief executive, is close to unveiling management changes that include shifting the bank’s finance chief to co-head its flagship securities business. Some roles in Gorman’s new team are still uncertain but Colm Kelleher, the bank’s CFO, is set to become co-head of the institutional securities arm, while Paul Taubman, a top mergers adviser, may be promoted as Kelleher’s partner. The line-up could be announced as early as Tuesday.
Zoe Cruz, the most senior woman on Wall Street, on Thursday became the latest high-profile casualty of the US subprime mortgage meltdown when she lost her job as co-president of Morgan Stanley. The ousting came three weeks after Morgan Stanley revealed it had lost more than $3.7bn on a disastrous subprime mortgage bet. The turmoil of recent months has already claimed the jobs of the chief executives of UBS, Merrill Lynch and Citigroup. Ms Cruz’s counterpart at Bear Stearns has also been ousted. In an unrelated move, Robert Scully, an experienced banker who was co-president with Ms Cruz, will move to a newly created office of the chairman to focus on key clients, particularly sovereign investors. The new co-presidents are Walid Chammah, a former head of investment banking who recently moved to London to head Morgan Stanley International, and James Gorman, who joined from Merrill Lynch last year and now heads the wealth management arm.