By Lauren Tara LaCapra and Jed Horowitz
Nov 5 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
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
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
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
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
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
Eichorn and Holzschuh also are joining the company's
management committee. Petitgas is already on the panel.