Morning Coffee: What Morgan Stanley’s potential new boss says about the firm. Analyst quits in epic meltdown
Morgan Stanley gave a possible window into its eventual succession plan on Monday by offering a huge promotion to someone with a polar opposite background from its current chief executive, opening up the possibility that the bank could look a bit different after James Gorman retires.
As part of a series of moves, Morgan Stanley gave its trading chief, Ted Pick, oversight over the firm’s investment banking division. Pick, seen a potential successor to Gorman, may have just cemented his front-runner status as Morgan Stanley’s next CEO as he now controls businesses responsible for half the firm’s revenue. What makes the move interesting is that he’s different from Gorman in almost every way, including his experience and personality.
With a background in consulting and wealth management, Gorman is one of the most conservative CEOs in banking. He loves sustainable, predictable revenue, and suggested several times during the bank’s latest earnings call that he sees the firm’s securities business, which Pick has run successfully for several years, as more of a cherry on top rather than a core business that can be relied upon for consistent revenue. When asked how seasonality and market volatility affected Morgan Stanley’s terrific trading results in Q1, Gorman appeared to go out of his way to talk up other businesses within the bank, like wealth management, while downplaying the importance of sales and trading.
“We will do fine when the markets are tough and we would do well when the markets are good,” Gorman said after the bank booked $4.4 billion in trading revenue in Q1, up 26% year-over-year. “There are others who might do better when the markets are good, that’s fine. What I care about is how we do when the markets are tough.”
But perhaps this is why Gorman may prefer Pick, who cut 25% of Morgan Stanley’s fixed income traders in 2015 while slashing risk-weighted assets and relying more on electronic trading. Pick helped mold Morgan Stanley into a trading behemoth while simultaneously ratcheting down risk. Whether he would hold the reins as tight with Gorman gone is the question.
Either way, Pick’s potential ascension would likely bring a change in attitude at the top for Morgan Stanley. Unlike the extremely mild-mannered Gorman, Pick is known to have a penchant for profanity. Gorman’s predecessor, John Mack, once played a trick on Pick by having compliance pretend to flag him for his expletive-laden emails. Needless to say, Morgan Stanley could become a bit more fiery if Pick eventually succeeds Gorman, though the current CEO is only 59 and suggested that he’s not leaving anytime soon.
Elsewhere, a sell-side analyst at New York equity research firm Sidoti & Co. quit his job while burning every bridge he could, only to unsuccessfully try to put out the fires with a bottle of champagne. In a since-deleted Instagram video captured by the New York Post, Francesco Pellegrino pops a bottle of champagne, takes a swig, pours the rest on his boss’s floor and leaves a short letter of resignation on his desk: “F#*k you I quit.” Pellegrino will likely have to search elsewhere for a recommendation.
Beyond Pick’s elevation, Morgan Stanley also appointed co-head of investment banking Frank Petitgas to run its international business. Susie Huang, current head of M&A in the Americas, will take Petitgas’s seat, making her the first female to run an investment bank at a bulge bracket firm. (WSJ)
Goldman Sachs will reportedly meet early this fall to discuss its own succession plans. The bank’s remaining decision is likely to name the successor to current COO David Solomon, who is widely expected to be named CEO following the reported year-end retirement of Lloyd Blankfein. (NY Post)
Credit Suisse has dismissed the MD who reportedly acted inappropriately with an intern earlier this summer. Paul Dexter, a former managing director within the firm’s M&A division, allegedly had previous instances of inappropriate behavior. (Bloomberg)
There are three constants in life: death, taxes and Nomura announcing plans to grow in the U.S. The bank wants to hire 15 senior-level investment bankers, focused mainly on U.S. M&A. (NY Post)
The former CEO of Heartland Payment Systems has been charged with insider trading. The SEC has accused Robert Carr of tipping off a romantic partner that the fintech firm would be acquired before the news became public. (WSJ)
Deutsche Bank has hired one of its own investors, private equity firm Cerberus Capital Management, to advise the German bank on its restructuring plan. DB has reportedly completed most of its job cuts, though this news could change that. (WSJ)
Employees at McKinsey & Company who pushed back on the consulting firm for doing business with the highly controversial Immigration and Customs Enforcement agency have got their wish. McKinsey will no longer consult for ICE. (NY Times)
Blackstone is planning to launch a $20 billion global private equity fund, its eighth. (Bloomberg)
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