Analyst Note| Michael Wong |
We are maintaining our $91 fair value estimate for narrow-moat-rated Morgan Stanley after James Gorman announced he will be stepping down as CEO in the next year. Gorman created significant value for Morgan Stanley shareholders; he was instrumental in transforming the firm into a more balanced financial institution with significant investment-management operations from an investment bank that was on shaky ground in the global financial crisis. Wealth and asset management have recently contributed about 55% of net revenue compared with closer to 40% before the financial crisis, and these businesses will likely be material drivers of the company’s long-term growth. While Morgan Stanley’s investment-management business has grown as a proportion of net revenue, the investment bank has continued to thrive with high league table rankings for underwriting and merger advisory and growth in trading market share.