Ted Pick, Morgan Stanley’s incoming chief govt, faces a number of challenges — together with having a tricky act to comply with in James Gorman — as one of many largest U.S. banks carries out a carefully watched management change.
Overall, Pick has “big shoes to fill,” Mayo mentioned. Gorman led the financial institution for 14 years, together with via the top phases of the 2007-09 international monetary disaster.
To his credit score, Pick has managed to indicate success in bringing the financial institution’s institutional-securities enterprise again to a “strong” high 5 place after “near failure” in the course of the monetary disaster, Mayo mentioned.
Morgan Stanley’s inventory was up 1.3% on Thursday.
The naming of Pick removes a adverse overhang — uncertainty over future management — for Morgan Stanley’s inventory. But it doesn’t remove the difficulties Pick faces on the helm of the financial institution, which presently instructions a market capitalization of $119 billion.
Mayo mentioned Morgan Stanley’s new chief govt faces asset-management headwinds, a muted investment-banking enterprise and challenges in managing former friends.
Pick mentioned in an interview with CBNC-TV that he plans no adjustments in technique on the agency.
“We know who we are after 15 years of transformation under James’s extraordinary guidance,” Pick mentioned. “We have a world-class wealth- and asset-management business. We’ve got a world-class integrated investment bank. And there are so many opportunities to grow both of them globally.”
Co-president Andy Saperstein, who was a candidate for the chief govt job, will turn out to be the top of wealth and funding administration. Another candidate, Dan Simkowitz, will turn out to be co-president and the top of institutional securities. The latter is Pick’s present job.
Earlier this 12 months, Gorman introduced he could be stepping down from the CEO put up earlier than the corporate’s 2024 annual common assembly.
Pick is slated to take over the job on Jan. 1, 2024, with Gorman turning into govt chair.
Odeon Capital analyst Dick Bove mentioned in an electronic mail to MarketWatch that Pick is the best alternative for the job. “The financial markets are moving away from buy-and-hold strategies at big banks to raising and moving money from the huge private pools around the world,” Bove mentioned. “That is what Ted Pick does best.”
Wall Street analysts may also reset their 2024 revenue expectations for Morgan Stanley, in one other problem for Pick, Mayo mentioned.
Combined, these components “can make for a tricky few quarters,” he mentioned. “Yet it also has potential to be a textbook transition.”
Questions stay over whether or not Gorman would attempt to step in if Morgan Stanley’s efficiency begins to fall quick, and whether or not the brand new administration crew could also be much less fast to make adjustments with their ex-boss nonetheless round.
Other difficulties embrace decelerated progress in Morgan Stanley’s wealth unit and weak spot in internet curiosity earnings in its third quarter, Mayo mentioned.
The financial institution’s investment-management unit “seems like it needs fixing up, especially with a seemingly poorly timed Eaton Vance acquisition,
in our view,” Mayo mentioned.
In a analysis word, KBW analyst David Konrad described the collection of Pick as eliminating an overhang for Morgan Stanley’s inventory.
Konrad mentioned Pick provides “strong risk-management skills and has been more heavily involved with the increased regulatory burden” on the six main U.S. banks which can be categorized as international systemically vital banks, or G-SIBs.
Pick has additionally labored with Mitsubishi UFJ Financial Group Inc.
MUFG,
which is Morgan Stanley’s largest shareholder, on two capital-markets joint ventures.
“A very important part of this transition is to ensure other key and talented executives remain at Morgan Stanley,” Konrad mentioned.
On this difficulty, Gorman mentioned, additionally in an interview with CNBC-TV, that each Saperstein and Simkowitz would stay on the agency.
“Unfortunately, we can only have one CEO, but they’re both going to be co-presidents,” Gorman mentioned about Saperstein and Simkowitz. “They’re going to work with Ted running the firm. And, yes, they’re going to stay. They’re committed to Morgan Stanley.”
Looking forward, an abroad acquisition could also be within the works, as hinted by Gorman in the course of the financial institution’s third-quarter name with analysts earlier this month.
“If you think of the combination of Middle East, India, Japan kind of offsetting what’s gone on in China, and then, strategically, I would be very surprised if this firm doesn’t do some transactions in both wealth and asset management over the next three years outside the U.S.,” Gorman mentioned. “I think we have a game plan for it. … The opportunities are clearly there.”
Source web site: www.marketwatch.com
