Why Have One Morgan Stanley When You Can Have Two?

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Morgan Stanley hopes very much that it is more than the sum of its (two) parts, especially as one of those parts is basically subtracting.

Answering questions at a presentation on Tuesday, James P. Gorman, the bank’s chief executive, encouraged investors to think of Morgan Stanley as “two integrated firms.”

On one side is the wealth management business, which generates at least 40 percent of the bank’s revenues. On the other is the securities business, which includes trading, Wall Street’s golden goose that has laid fewer eggs since the financial crisis….

Mr. Gorman said that he expected wealth management to continue growing and that, eventually, its return on equity — a measure of profitability — would be “well north” of 10 percent. The cost of capital for most big firms is generally understood to be about 10 percent, and Morgan Stanley has generated well below that since the financial crisis.

But shrunken fixed-income revenues may make it a little harder to nudge securities above 10 percent, Mr. Gorman warned.

Morgan Stanley Sees Itself as Two Firms in One [DealBook]

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