CEO James Gorman is a man with a plan.
Bloomberg reports that Morgan Stanley has a plan to boost return on equity in fixed-income trading above its cost of equity after four of the five units failed to meet that metric last year, CEO James Gorman has said.
The credit-trading unit can earn a 15% return and interest rates and foreign-exchange trading can each top 10%, Gorman, 54, said Wednesday at a conference sponsored by the New York-based bank. All had returns on equity of more than 5% last year, said Gorman, who cited 10% as the firm’s cost of equity.
'We’re not where we want to be with fixed-income and commodities', Gorman said. 'On the other hand, we think we’ve made more progress than perhaps has been understood, but this is a multiyear transformation of a very complex business'.
Finally, The Financial Times reports that Gorman is also promising to increase profitability at the bank’s wealth management business, two years after backing down on a pledge to achieve profit margins of 20%.
The wealth management unit will hit a pre-tax profit margin of 20 to 22 per cent in 2015, he told a conference on Wednesday, provided that Morgan Stanley’s deal to buy the rest of Citigroup’s Smith Barney retail brokerage is approved by regulators.
Morgan Stanley chief in profitability pledge (subscriber content)