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CEO James Gorman Says Business Not As Usual at Morgan Stanley … and That’s a Good Thing

Morgan Stanley has been shrinking to grow, and that strategy is working

James Gorman.jpeg

CEO James Gorman perfected a previously flawed strategy for Morgan Stanley, and now the bank is one of Wall Street’s best performers, according to Crains.

Morgan Stanley’s stock has risen 55%, more than any other big bank, and what is responsible for bringing the bank back from oblivion is another try at focusing on wealth management and making the bank smaller. Morgan Stanley spun off riskier operations and focused on what it was trying to accomplish years earlier. It is now focused more on  wealth management, a strategy reminiscent of Merrill Lynch, Gorman’s former employer. The strategy didn’t work for Morgan Stanley before the financial crisis, but it is a winner for the company now.

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Meanwhile, as a response to fears that the bank had too much exposure to risky European banks, Morgan Stanley cut its head count and its risky assets by around 20%. Gorman also got rid of some in-house hedge funds and commodity trading in an effort to downsize risk. Gorman told the Financial Times, “We are unambiguously business not as usual.”

Currently Morgan Stanley’s 16, 000 brokers manage $2 trillion in assets. Pre-tax margins are 20% and return on equity is 27%. Morgan Stanley still does plenty of initial public offerings, but given its emphasis on retail investors, the focus is as often on how to get clients in on IPOs as on managing the offering itself.



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