(Bloomberg) -- Morgan Stanley selected Ted Pick to become its new chief executive officer, succeeding James Gorman after a 14-year run that reshaped the Wall Street bank.
Pick, a co-president and three-decade veteran of the firm, will be elevated to the top role in January and join the board, the bank said in a statement Wednesday. Gorman, 65, will stay on as executive chairman.
In tapping Pick, 54, the firm is turning to the man credited with spurring a revival in its trading business after a perilous stretch during the 2008 financial crisis — a period when clients ditched Morgan Stanley and doubts about its ability to survive reverberated around Wall Street.
The Australia-born Gorman, once a surprise choice for CEO, rescued the bank from that near collapse and engineered a multiyear transformation with wealth management at its core. That strategic overhaul was accelerated by two signature deals announced in 2020, turning Morgan Stanley into a money-management powerhouse barreling toward a $10 trillion goal — and catapulting its market value above that of archrival Goldman Sachs Group Inc.
“He had a singular vision for the place, and over 15 years took us from near bankruptcy to a winning place,” Pick said in his first interview after the selection was announced. The CEO-elect said he will maintain Morgan Stanley’s direction and anticipates no change in strategy.
Read More: Meet Ted Pick, the Next CEO of Morgan Stanley
Pick beat out two other CEO contenders: Co-President Andy Saperstein and Dan Simkowitz, who has led investment management. Morgan Stanley said Wednesday that Saperstein will become head of wealth and investment management and named Simkowitz co-president and head of institutional securities.
That would avoid the dramatic exits that often play out on Wall Street when new leaders take over.
“I can’t remember any other succession where the contenders decided to stick around,” said Brennan Hawken, an analyst at UBS Group AG. “That for me is a win for Morgan Stanley.”
Morgan Stanley shares were little changed at $71.36 at 8:40 a.m. in early New York trading. They’ve declined 16% this year, less than the 28% slump for the KBW Bank Index.
The succession saga at the New York-based bank has played out methodically — and somewhat publicly — since Gorman’s chief deputy, Colm Kelleher, exited in 2019. Soon after, Gorman unveiled the biggest leadership shakeup in a decade, positioning a small group of lieutenants as his most likely successors. One of them, Jon Pruzan, exited earlier this year to be president at Don Mullen’s investment firm Pretium.
Gorman said in May that he intended to step down within a year, setting off the final three-way race. Pick was viewed as the most likely heir to Gorman, thanks to his role overseeing the more complex institutional securities business — which until recently was also the more dominant division. But with the bank’s recent acquisitions, the wealth-management unit has been capturing a bigger piece of the revenue pie, helping lift the prospects of Saperstein, who runs that arm.
“If this is managed well, this has the potential to become a textbook transition — a telegraphed transition with a known executive and other top managers staying on,” Wells Fargo & Co. analyst Mike Mayo wrote in a note to clients.
Read More: Morgan Stanley Succession Race Narrows to Three Men, One Year
Gorman has maintained that the next CEO doesn’t necessarily have to run the biggest business, noting he never would have landed the job because he was heading the smallest and worst-performing business.
And in an interview, he praised the board’s unanimous decision to elevate Pick, pointing to his successor’s experience in turnarounds, risk management, client relations and technology.
“He’s a world-class executive, and he understands our culture,” Gorman said. “He’ll tell you what he thinks, he’s passionate, and he has a tremendous following within this firm.”
In recent days, analysts have been raising concerns that the CEO hunt could drag out further. While some, including Hawken, said the ultimate decision wasn’t surprising, it may offer shareholders relief.
It “brings needed clarity and should aid direction after months of uncertainty,” Bloomberg Intelligence analysts Alison Williams and Neil Sipes wrote in a report.
Colorful Vocabulary
Once known for his colorful vocabulary, Pick has made Morgan Stanley his lifelong home — except for a stint in business school. He ascended through the ranks after a less salubrious start — as the last person hired into his analyst class — and his early rise was tied to his role as a capital-markets banker, helping companies raise money by selling stock. But that changed after 2008.
Then, he was thrust into leading the equities unit at a time when the bank was hemorrhaging clients. Under Pick, the unit went from hobbled to healthy and even surged past competitors to a No. 1 ranking. After his success in equities, he got another challenge: resuscitate the fixed-income division, the bank’s perennial sick child that struggled to keep pace with larger rivals. The division’s recovery since then is touted as a success story by the bank’s leadership.
Read More: Morgan Stanley’s Record Quarter Stained by Archegos Collapse
But the trading business has also suffered some black eyes. The prime brokerage division that Pick helped build into Morgan Stanley’s crown jewel got caught wrong-footed in 2021, when Bill Hwang’s Archegos Capital Management collapsed. The revelation that Morgan Stanley lost $911 million on dealings with the family office outed it as US banking’s biggest loser in the debacle. The firm also recently disclosed it’s in conversations with US prosecutors to resolve a probe into its block-trading practices — a business that falls under Pick’s command.
Ceded Ground
The more pressing challenge for Pick will be to restore market share in the investment bank after ceding ground to Goldman and JPMorgan Chase & Co.
The firm is waiting on a rebound in capital markets and dealmaking activity to help revive earnings in that business from depressed levels. At the same time, investors who had been heaping praise on its wealth unit are now seeking assurance that it can continue to gather assets at a rapid clip.
Read More: Morgan Stanley Shares Plunge After Profit Drops on Slowdown
Pick will be able to lean on Gorman, who has indicated he wants to help with the transition without specifying how long he plans to stay as chairman. When Gorman was made CEO in 2010, his predecessor John Mack held the role of chairman for two years before handing over that title to Gorman as well.
(Updates with shares in ninth paragraph, Mike Mayo comment in 12th.)