Published November 05, 2012
Morgan Stanley's Paul Taubman, who co-headed the company's investment bank, is stepping down and his long-time rival Colm Kelleher is taking full control of the unit.
Morgan Stanley Chief Executive James Gorman is looking to streamline decision making in its trading and investment banking unit by putting a single person in charge, a person familiar with the matter said. The bank has been rethinking parts of that business, such as commodities trading, as regulations globally cut into potential profits.
Investors have been waiting for either Taubman or Kelleher to step down since 2009, when Morgan Stanley named them as co-banking heads. Executives on Wall Street are rarely happy to share power. Taubman, 51, oversaw the bank's merger advisory and securities underwriting business, while Kelleher, 55, oversaw trading and securities sales.
Kelleher piloted the bank through turbulent markets as chief financial officer during the financial crisis. He is now leading Morgan Stanley's restructuring of its fixed-income trading business.
Taubman is a career-long banker focusing on merger advisory. Kelleher's broader range of experience made him a better pick to head the combined business, the person familiar with the matter said.
Taubman decided to retire after realizing that Morgan Stanley Chief Executive James Gorman, 54, planned to choose Kelleher, said the source, who was not authorized to speak about the matter publicly.
Gorman said in a statement that he hopes that Kelleher will help the bank continue to stitch together trading and banking businesses to boost revenue and profits.
Though the trading and banking business still accounts for about half of Morgan Stanley's revenue, an increasing share of the company's overall revenue is from retail brokerage, as Morgan Stanley buys out Citigroup's Smith Barney business over multiple years.
Morgan Stanley's wealth management business has delivered $10.1 billion in revenue so far this year, compared with $23.1 billion from the institutional securities business that Kelleher and Taubman oversaw.
An accountant by training who joined Morgan Stanley in 1989, Kelleher had been co-head of fixed-income in Europe and head of Global Capital Markets, as well as CFO for two years during the financial crisis, before taking on his current role in December 2009.
As co-head of the investment banking unit, Kelleher focused the bank's trading efforts on simpler instruments like U.S. government bonds, while scaling back from exotic instruments that demand high capital support.
At a conference in September, Morgan Stanley said that by the end of 2014, it hopes to reduce its risk-adjusted assets to $255 billion, or at least 35 percent below third quarter 2011 levels.
Other banks are rethinking their fixed-income trading businesses too. UBS said last week it was laying off 10,000 employees globally, many in fixed income.
Morgan Stanley has been cutting staff as well, and is considering the sale of at least part of its commodities trading unit because of changes to global banking and capital rules that are crimping profits.
As part of the reorganization announced on Monday, Kelleher elevated Mark Eichorn and Franck Petitgas to co-head the investment banking unit. Kenneth deRegt, head of fixed-income trading, and Ted Pick, head of equities, will continue to run those trading businesses day-to-day and report to Kelleher. All four will report into Kelleher, who is based in London.
Eichorn, 48, has headed mergers and acquisitions in the Americas since 2009, and will be based in New York. Petitgas, 51, is head of international capital markets and will continue to oversee the trading businesses from London.
In another change, institutional securities vice chairman Jeff Holzschuh, 52, who focuses on the power and utilities industries, has taken the new title of chairman of institutional securities and will serve an ambassadorial function concentrating on "key client relationships globally," the company said.
Eichorn and Holzschuh also are joining the company's management committee. Petitgas is already on the panel.