Awards for Excellence 2018
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Morgan Stanley’s journey to the very top of US investment banking has been built on a fairly simple principle: to give the best advice and execution to its clients. There will be few firms that do not claim to have a similar ambition, but the difference at Morgan Stanley, under president Colm Kelleher, is just how much of the business is set up and run with precisely these objectives in mind.
Take the organization of its financing operations: one centrally managed syndicate function and co-located product teams. And that’s not to mention the unusually long tenure of its senior product staff – after 20 years of working together, many can finish each other’s deals as well as their sentences.
Clients across the investment bank are spoken of in relationship, not transactional, terms. Its bankers talk of being product-agnostic, but the firm is no longer wasting effort trying to create jacks of all trades and masters of none. Getting the connections to work internally, so that product specialists can be brought into the conversation quickly and flexibly, has ended up being more important than having people expected to speak on everything.
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Colm Kelleher |
The transformation since the financial crisis is certainly bearing fruit: in the first quarter of 2018 Morgan Stanley posted record profits.
It is fairly obvious that when a firm cannot deploy balance sheet as often as some (although it does selectively, and its joint venture with MUFG gives it a capacity that can surprise rivals), the relationship with a client needs to start in the boardroom. Strategic advisory excellence is at the core of what Morgan Stanley offers.
That advisory piece can take the firm deep into a company’s capital structure and demand coordinated and multi-faceted responses. In equity and equity-linked capital markets, the firm was pre-eminent in the awards period in the US market, climbing three places to top the Dealogic rankings.
Morgan Stanley’s ECM prowess is to be expected, but its DCM offering has been a slower build. It is far from being a volume shop, but it is making its mark where it counts, on critical pieces of strategic work that fit into the complex situations on which it advises.
As well as handling the equity pieces, the firm was lead left on the $1.75 billion two-tranche bond offering for Crown Castle – an occasion where it was also lead left on the $11.3 billion financing package backing the borrower’s acquisition of Lightower, the second-largest underwritten commitment in 2017 for a triple-B- company.
It excels at bringing foreign borrowers to the US market. Alibaba’s $7 billion senior bond, where Morgan Stanley was lead left as well as billing and delivery agent on all tranches, was the largest SEC-registered bond ever from an Asian company.
The rebuilding of Morgan Stanley’s fixed income sales and trading business on a leaner, more efficient model, has been the work of several years, but the results are still proving remarkable. After slashing of its fixed income headcount at the end of 2015, the bank now makes more money from the franchise than before and regularly outpaces the $1 billion quarterly run rate that chief executive James Gorman says it is sized for.
Not only that, but in the first quarter of 2018 the bank posted its highest equities revenues in a decade. It has been the top revenue generator in the US for several years and is recognized as the global leader. It also helps make the bank Euromoney’s choice as the world’s best bank for markets.
