Overview: after the storm

Colm Kelleher is to take up the financial reins at
Morgan Stanley following fellow
British chartered accountant David Sidwell’s decision to walk away from the
chief financial officer post less than four years after joining the global
financial services group.

During those four years the Wall Street lender has gone through a massive
shake-up, including the high-profile ousting of chief executive Philip Purcell
in 2005.

What’s happened…

Sidwell, an alumnus of PricewaterhouseCoopers, has said he wants to quit
banking and focus on charity work. He has been closely involved with Village
Care of New York, which provides help for the elderly or those with AIDS.

His replacement, Kelleher, is an Andersen old boy, having joined Morgan
Stanley in 1989. His new job is one that has a traumatic recent history

In 2005, growing dissatisfaction with Morgan Stanley’s investment banking
performance led to the departure of Purcell, who was replaced by the outspoken
John Mack as CEO.

Mack then instigated a period of restructuring that is only now beginning to
bear fruit. Results released in March this year showed the group was outpacing
many of its Wall Street rivals with a 29% quarterly increase in revenues. This
performance was put down to ‘effective, disciplined risk-taking by our team in
institutional securities’, according to Mack.

What’s going to happen…

Sidwell will be a tough act for Kelleher to follow, but he is well-placed as
the current head of global capital markets to understand the challenges ahead.
He will need all that knowledge over the coming months.

Despite general problems in the US ‘sub-prime’ mortgage market, the lender’s
position looks reasonably solid, as does its performance in fixed income,
currency and equity sales.

But Kelleher will need to keep an eye on the investment banking division,
which despite being 16% up on last year was down 22% on the fourth quarter at
$1.05bn (£0.53bn).

Kelleher might also want to pay close attention to the behaviour of his
colleagues. Morgan Stanley recently agreed to pay $46m (£23m) to settle a sex
bias lawsuit that accused the firm of discriminating against thousands of female
financial advisers.

Kelleher won’t want to write out another cheque that large again – at least
not until he signs off Mack’s own pay packet of $41m.

Related reading