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MarketWatch First Take
The start of a roll for Morgan Stanley?
Published: Oct. 18, 2012 at 9:50 a.m. ET
Commentary: Gorman wins reprieve from industry pressure
XBD
SAN FRANCISCO (MarketWatch) — There must have been times this year when James Gorman thought about hitting the escape key and doing a Vikram Pandit.
The CEO of Morgan Stanley MS, +0.93% had just endured a disappointing 2011 in which profits at his brokerage fell 12.7%. The bank was battling nasty litigation. And there were doubts that its core trading business would ever return to previous heights. The critical blow came in June, when Moody's Investors Service MCO, +2.21% downgraded the firm by not one but two notches. Read about Moody's downgrade of Morgan Stanley.
Morgan Stanley CEO James Gorman.
The move led one analyst to suggest Morgan might be better off without Gorman. Or being sold to a bigger bank.
If those concerns haven't disappeared, they have at least faded, especially after Morgan Stanley on Thursday reported a third-quarter profit of $535 million not including an accounting charge related to the value of its own debt. See full story on Morgan Stanley's third-quarter results.
Moreover, Gorman probably couldn't be happier about how the profits were achieved: Revenue from its key trading division was up 33% from last year and 89% from the previous quarter. Daily risk fell. Total revenue was up 18% versus a year ago. Costs held steady.
There is some reason for caution. We have seen similar quarterly results from Wall Street firms XBD, +0.74% in the past wiped away in the following reporting period. So, until a nice quarter becomes a nice year or more, Moody's probably won't revise its outlook.
That said, for Gorman, his company's third-quarter results have to feel like a reprieve. His trigger finger may still be on the escape key, but it's not itching.
— David Weidner
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