Morgan Stanley's resurgence is bad news if you're a banker who likes working for a boss who likes getting his hands dirty, rather than one partial to intricate strategy presentations. Where John Mack, the ex-bond trader who tried reinvigorating Morgan Stanley's trading business failed, James Gorman - the ex-McKinsey & Co consultant, seems to have succeeded.
Gorman had a plan. And Gorman's plan is paying off. In the second quarter, it wasn't just Morgan Stanley's equities business that did very well, but Morgan Stanley's everything. "The revenue beat was pretty much across the board, with investment banking, trading and commissions all doing a bit better than expected,” Chris Kotowski, an Oppenheimer & Co. analyst, wrote in a report yesterday.
Reuters says Gorman's plan for Morgan Stanley's equities business was known as 'project velocity.' It involved moving servers closer to exchanges and deploying specialist sales staff to deal with clients. In yesterday's conference call, Gorman said equities had benefited from "research driven content, market insight, and state of the art trading technology." Thanks to the improvements, Morgan Stanley now ranks second in the hierarchy of equities firms which U.S. clients most like to do business with. One year ago, it ranked fifth.
John Mack, the charismatic ex-trader who preceded Gorman, spent years trying to reinvigorate Morgan Stanley's trading business without much success. Now Gorman, the rationalist, has breathed new life into the business. Charisma is no longer required - the new banking CEO is, above all, sensible. Antony Jenkins at Barclays and Michael Corbat at Citigroup are of a similar process-driven ilk, although neither man has Gorman's McKinsey pedigree. “I think things are pretty rational right now,” Gorman said yesterday. “It is a sober environment that we operate in. The leadership of the banks, all of whom I know pretty well, are very sober quality professional people. I don’t see a lot of holes at the large institutions in terms of rational behavior.”
Equities trading revenues on Wall Street jumped 42% in the second quarter, more than in three years. (Bloomberg)
RBC has hired Darrell Uden, former head of ECM at UBS. (Financial News)
3i tried to shorten its bonus payment period from 5 to 3.5 years. Shareholders rebelled and it dropped the plan. (Guardian)
Morgan Stanley cut compensation spending in its investment bank by 1.4% in the first half. (Bloomberg)
Bank of America has a higher percentage of residential mortgage-backed securities in its available-for-sale portfolio than JPMorgan and Citigroup. Higher exposure to RMBS implies it has greater exposure to rising rates.(Reuters)
Science students are unreasonably optimistic. When they receive unexpectedly low grades, they’re discouraged from continuing with their studies. (Bloomberg)
Leadership is all about being lovable, and then fearsome. (HBR)
How to write the perfect CV. (Twitter)