NEW YORK, Might 19 (Reuters) – Morgan Stanley’s (MS.N) James Gorman plans to step down as chief government inside a yr however keep on as government chairman, drawing to an in depth 13 years within the position throughout which he constructed the Wall Avenue agency right into a wealth administration powerhouse.
Gorman, 64, advised shareholders on Friday the financial institution’s board has recognized three sturdy candidates to succeed him, with out naming them.
Co-presidents Ted Decide and Andy Saperstein, and head of funding administration Dan Simkowitz, are extensively seen as contenders for the highest job.
“I positively haven’t any plans to exit like Logan Roy,” Gorman advised shareholders in his trademark dry humor, referring to a personality in an HBO tv present by which the CEO dies with out having chosen a successor.
Whereas Gorman was usually requested about succession in recent times, the announcement on Friday was sudden and units up the ultimate stretch of a race amongst potential candidates. The three most frequently cited are white males, nonetheless, which might renew the controversy about range on Wall Avenue.
Gorman’s determination additionally places a highlight on among the different long-serving CEOs on the largest U.S. banks, akin to JPMorgan Chase & Co’s (JPM.N) Jamie Dimon and Financial institution of America Corp’s (BAC.N) Brian Moynihan.
Gorman mentioned that he’ll turn out to be government chairman as soon as a brand new CEO is chosen, a board title seen as extra closely concerned within the firm’s affairs than non-executive director roles.
The position shocked some folks internally, one senior Morgan Stanley banker mentioned. One other Morgan Stanley supply mentioned the title was to point continuity. Gorman’s predecessor John Mack stayed on for 2 years as chairman when the Australian-born government took over as CEO.
Defending the financial institution’s report on range, the supply mentioned Morgan Stanley has a feminine chief monetary officer, who’s youthful than the executives seen as potential successors. The manager committee can also be extra various, with girls and folks of coloration represented, the supply mentioned.
Some analysts praised Gorman’s tenure at Morgan Stanley however mentioned though the succession is more likely to be orderly, traders could also be disenchanted.
Veteran financial institution analyst Dick Bove mentioned Gorman’s retirement is a blow to the corporate. “The failure to announce a successor will tear the corporate aside if it isn’t executed shortly,” Bove, a financial institution analyst at Odeon, wrote in a be aware.
Morgan Stanley shares have been down 2.2% in afternoon buying and selling.
TRANSFORMING MORGAN STANLEY
Gorman has refocused the Wall Avenue agency right into a extra diversified firm that’s much less reliant on what have been its conventional strengths — buying and selling and funding banking — since being appointed CEO in 2010. The much less unstable enterprise of wealth administration accounted for 45% of agency’s income within the first quarter.
The diversification helped the financial institution’s share value take a lead over its closest rival, Goldman Sachs Group Inc (GS.N), which determined to largely stick with its knitting popping out of the monetary disaster of 2008.
“Constructing out their wealth administration division has been an actual boon to the corporate, and so they bested Goldman in that apply,” mentioned Kim Forrest, chief funding officer of Bokeh Capital Companions.
Gorman struck main offers together with the acquisitions of cash supervisor Eaton Vance, on-line dealer E*Commerce, and stock-plan supervisor Solium Capital.
He was additionally the important thing architect behind Morgan Stanley’s buy of Smith Barney, a brokerage and funding adviser that grew to become a cornerstone of the financial institution’s wealth administration arm.
Gorman “has executed a masterful job of remodeling Morgan Stanley into the mannequin that the majority main banks need to be, with a deal with asset administration, monetary advisers,” mentioned Artwork Hogan, chief market strategist at B Riley Wealth in Boston.
Nonetheless, it has not all been plain crusing for Gorman.
The financial institution earlier this month mentioned it is in talks to resolve a greater than year-long investigation by U.S. regulators into its block buying and selling practices.
Reuters has reported that the U.S. Securities and Alternate Fee has been probing whether or not monetary executives might have damaged the principles by tipping off hedge funds forward of huge gross sales of shares that the financial institution has managed.
The lender was additionally caught up in business probes by the SEC into worker communications on messaging platforms that had not been authorized by the corporate, which resulted in a $200 million high-quality.
POTENTIAL SUCCESSORS
The announcement set off hypothesis on Wall Avenue about who among the many potential successors was the probably to get the job.
Mike Mayo, banking analyst at Wells Fargo, famous that Saperstein, 56, could possibly be the “main candidate given the expansion of wealth, enhance in consumer belongings.”
KBW analyst David Konrad mentioned whereas Saperstein runs “essentially the most outstanding enterprise,” Decide, 54, co-president and head of the institutional securities group, could also be a “barely extra possible alternative” as a result of he was “instrumental in turning round” the financial institution’s fixed-income, currencies and commodities enterprise.
Simkowitz, the oldest of the three at 58, is head of funding administration at Morgan Stanley and co-head of the agency’s technique and execution.
Reporting by Tatiana Bautzer; Modifying by Toby Chopra
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