You’d have to say, if you were, for instance, Wells Fargo or Citigroup, that Morgan Stanley’s got it pretty good. It’s the top of the trading heap and even managed to set a record quarterly profit at the height of the coronavirus pandemic. Sure, there are the occasional setbacks, like a $60 million fine for messing up the “decommissioning” of wealth-management data centers, whatever that means, but as Jamie Dimon or Mike Corbat could tell you (the latter if he's still paying attention, that is) things could be a whole hell of a lot worse.
CEO James Gorman, however, is not one to be satisfied with success and, on the whole, he’d rather be running an entirely different bank. And so, having just achieved a career-long ambition to buy, uh, an online retail brokerage, and an employee stock plan business, Gorman is dropping another $7 billion to turn his white-shoe Wall Street power broker into a nice, safe, boring little Main Street shop.
“We wanted to make sure that in very difficult times Morgan Stanley is steady in the water,” Gorman said Thursday in a call with analysts. “A decade ago, our asset management and wealth management businesses had bright spots in them, but they weren’t big enough, they weren’t at scale enough where they can provide real stability to the rest of the organization.”
Bulking up these businesses even more, Mr. Gorman hopes, will persuade analysts to view his firm less like an investment bank and more like Charles Schwab, which despite its staid reputation trades at about 20 times earnings, double the multiples of Morgan Stanley and Goldman.
If Morgan Stanley’s multiple rises halfway to Schwab’s, Mr. Gorman said, the bank’s stock should be worth twice its value today. The C.E.O. acknowledged that such a rerating is a challenge: “I hope it happens in my career, let alone in my lifetime.”
Morgan Stanley to Buy Eaton Vance for $7 Billion [WSJ]
With $20 billion in deals this year, Morgan Stanley pivots further away from risky Wall Street [CNBC]
Morgan Stanley’s Makeover [DealBook]
Morgan Stanley Finds Money in the Cushion [WSJ]
Morgan Stanley Fined $60 Million in Failed Data-Center Oversight [Bloomberg]