Morning Coffee: Morgan Stanley bankers are now free to roll-up their shirt sleeves. Sergio Ermotti's dark forecast
It's the start of a new era at Morgan Stanley: Colm Kelleher - the 61 year-old president of the bank, who's worked there since 1989 - announced yesterday that he's retiring in June. Morgan Stanley CEO James Gorman says Kelleher's, "sharp mind, wicked humor and Irish charm," will all be missed. So too, if you're a sartorial stickler, will be his insistence on rigorously proper workwear.
While Goldman Sachs bankers are now free to put themselves about in Ralph Lauren jeans on any day of the week, Reuters says Kelleher was a traditionalist. Such was his enthusiasm for Morgan Stanley's past as a WASP-y 'white shoe firm' that Kelleher was reportedly known to go about remonstrating with employees who rolled-up their shirt sleeves. - Rolled-up sleeves were seen as lowering the tone of business dress. With Kelleher gone, Morgan Stanley's bankers should therefore be freer to show their elbows.
Sharper elbows at a post-Kelleher Morgan Stanley may be more than just literal. Six years ago, Kelleher famously said that Morgan Stanley was catching-up with Goldman Sachs on advisory revenues because, "We're nicer guys." Without a charming Irishman at their helm, Morgan Stanley's bankers may be a little less friendly yet.
None of this is to say that Kelleher himself was averse to using his own elbows when necessary. Bloomberg notes that Kelleher was highly competitive and that he won out in an internal battle with Morgan Stanley dealmaker Paul Taubman in 2012. Taubman left the bank; Kelleher was promoted.
Kelleher's decision to retire in three months' time may be symptomatic of his very ample fortune (put at €117m by the Times), or it could be because a new generation has been snapping at his immaculately-clad heels. Kelleher had long been considered the likely successor to Morgan Stanley CEO James Gorman, but new candidates emerged in July, when 50 year-old Ted Pick was named as head the investment-banking and trading division and 58 year-old Franck Petitgas was put in charge of international operations.
As is ever the case with retiring senior bankers, Kelleher won't be disappearing from the office entirely. After June, he will still be a senior advisor at the bank. This may help ease the transition - Kelleher's famous work ethic (during the financial crisis he conducted business lying on his office floor due to a back injury) may militate against a life spent indulging in his loves of wine and classical music. Having Kelleher occasionally still in the building could also maintain higher sartorial standards at Morgan Stanley for a while longer yet - unless of course he comes back in jeans and a t-shirt, in which case things could go downhill fast.
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Separately, UBS CEO Sergio Ermotti is doubling down on his predictions of doom. Fresh from declaring last week that the first quarter was the worst in living memory, Ermotti has now told Euromoney that Q1 is unlikely to be a one-off. Unpredictable macroeconomic growth, complex geopolitics and growing risk aversion are all taking their toll on banks, said Ermotti. Cost cutting is not the solution; restructuring is. Expect more bank mergers in Europe.
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