John Mack will step down as CEO of Morgan Stanley in January but remain as chairman, having navigated guided the bank through the stormiest period for the US financial industry since the 1930s.
Mack, who is 64, will be succeeded by James Gorman, the head of Morgan Stanley's wealth management business, the bank said yesterday. Gorman, 51, was one of the first executives Mack hired when he returned to the firm in 2005.
Robert Kidder, lead director of Morgan Stanley, said in a statement that Mack told the board 18 months ago he wanted to step back from the CEO role when he turns 65 in November.
Gorman has been co-president of Morgan Stanley for two years and was a key player in the firm's retail brokerage Morgan Stanley Smith Barney. He also worked for Merrill Lynch and the consulting group McKinsey & Co.
Morgan Stanley's other co-president, Walid A. Chammah, will become chairman of Morgan Stanley International at the end of the year, and will continue to be based in London.
While Mack has taken criticism in recent months for holding Morgan Stanley to a newly conservative approach to trading, he led the investment bank through the height of the financial crisis last year even as three of its peers — Bear Stearns, Lehman Brothers and Merrill Lynch — either collapsed or were acquired.
Lehman went bankrupt last Sept. 15, almost exactly one year ago, becoming the largest bankruptcy in US history and bringing the U.S. financial system precariously close to collapse, prompting a massive intervention from the government.
In the last months of 2008, Mack scrambled to keep Morgan Stanley on steady financial footing. He struck a deal with China's international investment fund to sell a portion of the company for $5 billion and raised $9 billion in a deal with Japan's Mitsubishi UFJ Financial Group.
In the weeks following the collapse of Lehman and the sale of Merrill to Bank of America Corp, he oversaw the company's transition to a bank holding company, making it eligible for government aid but also bringing tighter regulatory scrutiny.
As the financial crisis has ebbed, Morgan Stanley has continued to post losses — more than $1.2 billion in the second quarter. Meanwhile, its only remaining rival, Goldman Sachs, has regained momentum, earning more than $2.7 billion during the second quarter.
Morgan Stanley's losses reflected big charges from its real estate investments and costs associated with repaying $10 billion in government bailout money.
The criticism from Wall Street referred to what Morgan Stanley had called a more balanced approach to trading, which failed to generate the kind of revenue its earlier risk taking had produced.
The results show in its stock price. Morgan Stanley shares closed Thursday at $28.64, down about 37 percent since Mack took over in June 2005. Goldman shares are up about 68 percent in that same time period.