Morgan Stanley raises targets, but Wall Street wants more
MORGAN Stanley raised key profitability and efficiency targets, but those loftier goals failed to impress Wall Street analysts, who repeatedly asked chief executive officer James Gorman why the bank could not do even better.
The new targets came after Morgan Stanley reported fourth- quarter results that beat analyst estimates and exceeded Gorman’s previously stated ambitions for wealth management, bond trading, expenses and returns on shareholder equity.
During his eight years as CEO, Gorman, 59, has been working to transform Morgan Stanley from a Wall Street firm whose risktaking nearly capsized it during the 2007 to 2009 financial crisis into a bank that relies more on businesses that generate steady fees, like wealth management.
The strategic update he laid out included annual pretax profit margins of 26 per cent to 28 per cent for wealth management, returns on equity (ROE) of 10 per cent to 13 per cent and a cost- torevenue ratio of 73 per cent or less in the coming years.
But analysts grilled Gorman about the targets during a conference call to discuss results, arguing that the bank is already at or near those goals and should be able to do much better.
The back and forth took a cheeky turn when Gorman addressed an analyst with an exasperated ‘ Oh my God’ before again going through his rationale, including the possibility of a recession hurting profits. — Reuters