A MOM, wannabes and puppies
I am crest-fallen. My reputation as someone who reads the runes correctly has been ruined. In an earlier column, I fulminated against the meaningless title vice-chairman.
Annoyingly, Chris Carter, who joined Morgan Stanley last May as vice-chairman in the institutional securities division, has risen from the dead. Carter now has a proper job as opposed to an ethereal, strategic role. In a recent re-shuffle, he replaced Colm Kelleher as head of global capital markets.
Chris of course is a well-known MOM. And no, I am not referring to the fact that he cares for his children. MOM is insider speak for: “mate of Mack”. Similar nomenclature is used over at Barclays, where one talks about a FOB or “friend of Bob” (Diamond). Mr Carter’s ascension started me pondering on the state of Stanley in the reborn again Mack era.
“Mack has put them back on track,” a commentator trumpeted. The numbers certainly look good. Discussing 2007’s first-quarter results, chief executive John Mack highlighted record revenues and earnings and a return on equity of more than 20% for the sixth quarter in a row.
Chris Carter, who joined Morgan Stanley last May as vice-chairman in the institutional securities division, has risen from the dead
However, a mole was less complimentary: “Mack the knife brings more strife.” Bankers are leaving. A few weeks ago Merrill hired the esteemed Jonathan Grundy. Grundy, a power and utilities banker, had been with Morgan Stanley for over 15 years. There are other deserters: John Crompton, Gary Cottle, Mark Echlin, Jeremy Heywood, Henry McVey, Nick Wiles and David Sidwell, who is retiring as CFO to focus on philanthropy. This is, of course, the post-bonus, roundabout season. Some complain that Morgan Stanley is not practicing joined-up banking. In other words, investment bankers are weak at cross selling. First-quarter 2007 advisory revenues disappointed. They were down 40% on the previous quarter to $390 million. I’m surprised. I would have thought that charming Walid Chammah, global head of investment banking and another MOM, would not tolerate laggards. Couldn’t closer inter-division co-operation be increased by incentivizing the bankers differently?
I recently had a drink with a top financial institutions specialist. “Abigail,” he ruminated. “I’m not sure what Morgan Stanley stands for anymore. In the old days, it was the blue-blooded Wasp firm staffed by investment bankers with red braces and gleaming loafers. Now it’s a Goldman wannabe.” But in today’s world, surely every investment bank wants to be Goldman Sachs? A Stanley insider did tell me that a lot of internal conversations involve a Goldman comparison.
Morgan Stanley’s share price has soared 60% since the start of 2005 – but for sustainable growth Mack must tackle the under-performing wealth and asset management businesses. In the first quarter of 2007, pre-tax income from the institutional securities business was 6.6 times that achieved by the combined global wealth management and asset management divisions. “The decision to appoint Owen Thomas as president of investment management in December 2005 shows Mack is doing the right things,” a source argues. Thomas was previously head of Stanley’s respected real-estate business. It is odd that pre-tax income in asset management for the fourth quarter of 2005 was $383 million, compared with just $236 million in the first quarter of 2007. The asset-management business houses volatile private equity. But this trend is still counter-intuitive.
When Mack came back, there was chatter that he would clean the firm up and sell it. Now Stanley has a market capitalisation of $93 billion, no one refers to it as a potential target. Are we all missing something? Perhaps UBS should don its dancing shoes (or should that be prancing shoes?) – UBS and MS would be an awesome combination.
And talking of connecting businesses, last Tuesday Merrill Lynch appointed Jimmy Quigley as chairman of Merrill Lynch International. In the press release, the two Fs (Fakahany and Fleming, co-presidents of the firm) purr: “Jim’s overall focus will be to drive our international client efforts across the firm – in other words, to connect the dots across our origination, trading, private client and principal investing businesses.” Is this a promotion for quick-witted Quigley or a recognition that gyrating Jimmy cannot be boxed in and must be allowed to wander freely around the globe?
“You’re always so nice about Merrill Lynch,” a mole grumbled. “They are your favorites.” I reminded Mole that I am not a kindergarten teacher presiding over feral four-year olds – though sometimes it can feel like that. And to use the language of my former headmistress: I am disappointed by the Sports Direct deal. In February, Merrill acted as global co-ordinator, bookrunner and sponsor for the flotation of Sports Direct, a sportswear retailer. Since then there has been an ambiguous trading statement, a resigning chairman and a sinking share price. Maverick Mike Ashley, the company founder, and urbane Simon Mackenzie-Smith, Merrill’s head of UK investment banking, settled an expense bill with a game of Spoof, (think liar’s poker-lite). This merely added to the impression of unprofessionalism. “Investors are unhappy,” a rival chortled. “Debenham’s (another Merrill IPO) was a dog and now Sport’s Direct is diving, Merrill can’t afford a third puppy.” Another banker was more emollient: “We’ve all had difficult deals. I don’t think Merrill has run for the hills. I’m pretty sure they’re buying back stock.” I wonder what Greg Fleming, a formidable dealmaker himself, makes of it all? I am meeting him next week.
The lure of Amsterdam
The plush London post code of W8 is home to some of London’s most influential bankers. A mole whispers that Russell Chambers, Credit Suisse’s chief executive for the UK, Bob Diamond, chief executive of Barclays Capital, Anshu Jain, co-chief executive of Deutsche’s corporate and investment bank, Jonathan Moulds, EMEA president of Bank of America, Robert Pickering, chief executive of JP Morgan Cazenove and Bill Winters, co-chief executive of JPMorgan, all live in leafy Kensington. What a lot of chiefs. On second thoughts, make that less leafy Kensington. Last week, a scheme to redevelop Holland Park Comprehensive was given the green-light. Some 59 trees will be destroyed. The bulldozers trundle on-site in June 2008. “The legendary Mr Diamond now has a social as well as a business reason to move to Amsterdam,” my mole muses. By the way, I’m beginning to believe that A (Atticus) may vanquish B (Barclays) and therefore B (Barclays) will not eat A (ABN Amro). Is this a buying opportunity for Barclays’ stock? What do you think?
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