In his initial quarterly earnings report to investors on Tuesday morning, the recently appointed chief executive officer initiated his presentation with charts illustrating the “15 years of transformation” undergone by the company. Between 2009 and 2014, the firm predominantly derived its revenue and profit from its Wall Street operations. However, the period from 2015 to 2019 saw a shift toward a more balanced split, although its institutional securities segment continued to generate more revenue from 2020 to 2022.
WATCH: Morgan Stanley warns about growth in the wealth business.
No longer the case, as of 2023, the wealth and investment management units took the lead, contributing to 58% of the firm’s revenues, creating an $8.6 billion gap over the investment bank. These reliable businesses also accounted for 62% of the profits last year.
Ironically, Ted Pick ascended to the top position through the Wall Street unit, which now represents the smaller segment of the firm. However, this shift reflects James Gorman’s 14-year endeavor to enhance the bank’s predictability, especially after its near-collapse in the 2008 financial crisis.
During the last quarter’s earnings call when Pick was at the helm, Gorman expressed his optimism, stating, “My hope and expectation are to hand over Morgan Stanley, with as clean a slate as possible, and deal with a few of our outstanding issues in the next couple of months.” He added, “I’m very excited.”
Morgan Stanley’s closest competitor, Goldman Sachs Group Inc., is also moving in a similar direction. They highlighted progress in divesting investments made with their own funds and emphasized attracting fee-earning client funds.
Octavio Marenzi, CEO at consultancy Opimas, characterized the recent quarters for both Goldman Sachs and Morgan Stanley as marked by small, incremental changes. He noted that these results underscored the stability of these institutions and, frankly, were perceived as a bit boring.