In what Jim Carmer called a “classic” move, Morgan Stanley’ s (MS) longtime CEO James Gorman spooked the market Friday when he said he’ll be stepping down. We’re disappointed to see him go but have full confidence in the bank going forward — and see a potential buying opportunity. During the bank’s annual meeting, Gorman said he expects to retire from his 13-year stint in the top job sometime over the next 12 months, barring a “major change” to the external environment. At that point, Gorman said he intends to continue to serve as executive chairman for a period of time. He also said Morgan Stanley’s board of directors has identified three “very strong” internal candidates to replace him and lead the bank to another decade of growth. Jim on Friday matched Gorman’s confidence in the future of Morgan Stanley, saying its stock looked very attractive at current levels. “I got in touch with James Gorman this morning … This is actually classic James. This is the way he works. It was planned. It was long term,” he said. “I think it’s a screaming buy here.” While the news was not a complete surprise to investors, it did put a timeline on Gorman’s retirement for the first time. Morgan Stanley shares fell more than 2% Friday, to around $82 apiece — extending weakness in the stock that began in March with the onset of the U.S. regional banking crisis. The day before Gorman took over as CEO, on Jan. 1, 2010, Morgan Stanley stock closed at $29.60 per share. The stock has sharply outperformed the KBW Bank Index over his tenure. MS .BKX mountain 2009-12-31 Morgan Stanley’s stock performance versus the KBW Bank Index since Dec. 31, 2009. “A management transition often creates short-term stock weakness, and we feel that may be the case this time given the importance of Gorman’s role in reshaping the firm over the past decade,” Mike Mayo, an analyst at Wells Fargo Securities, wrote in a note Friday. “However, his willingness to stay on as executive chairman should dampen negativity,” he added. Gorman took over Morgan Stanley in the shadow of the Great Recession of 2007-2009 — a period of extreme tumult for the firm and the U.S. banking sector overall — and embarked on a strategic shift toward wealth-and-asset management, away from its traditional focus on the more volatile areas of investment banking and trading. “We’ve steadily de-risked parts of the business that got us in trouble during the [global financial crisis], and we obviously made a major push in building up wealth and asset management, and it worked,” Gorman said in a CNBC interview earlier this year . Acquisitions were a big part of that push. After taking full control of wealth manager Smith Barney a decade ago , Morgan Stanley bought brokerage E-Trade and investment management firm Eaton Vance in October 2020 and March 2021, respectively. “We’re delighted with where we got to,” Gorman said during the same CNBC interview. Morgan Stanley’s investment banking and trading division accounted for two-thirds of its revenues in 2008. That figure stood at roughly 45% in 2022. Wealth management revenues grew from $7 billion in 2008 to $24.4 billion in 2022 — from about 28% of the total, to 45%. The shift in revenue composition is good for shareholders because fee-based wealth and asset management is considerably more stable. Investors like steadiness, so they’re willing to pay more for every dollar of wealth-and-asset-management revenue compared with investment banking and trading. Over time, this dynamic should allow Morgan Stanley to command a higher price-to-earnings ratio. That has been a key part of our investment thesis in Morgan Stanley, which we’ve owned for about two years, and will remain so under new leadership. According to CNBC’s Hugh Son , Morgan Stanley’s three internal CEO candidates are Ted Pick, head of Institutional Securities Group; Andy Saperstein, head of Wealth Management; and Dan Simkowitz, who leads the firm’s investment management division. (Jim Cramer’s Charitable Trust is long MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
James Gorman, chairman and chief executive officer of Morgan Stanley, speaks during a Bloomberg Television interview in Beijing, China, on Thursday, May 30, 2019.
Giulia Marchi | Bloomberg | Getty Images
In what Jim Carmer called a “classic” move, Morgan Stanley’s (MS) longtime CEO James Gorman spooked the market Friday when he said he’ll be stepping down. We’re disappointed to see him go but have full confidence in the bank going forward — and see a potential buying opportunity.
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