Morgan Stanley The New Merrill Lynch?

I saw this on Dealbreaker, and I've been following it for a while now. Morgan Stanley completed their acquisition of MSSB from Citi after long talks of a deal. Perella Weinberg Partners LP was hired to provide the independent fixed value of Citi's stake in MSSB, and they came up with $13.5 billion, which was far below what Citigroup had thought they could get.

The arrows are a bit superfluous, but take a look at these net revenues from 2007- Aug2012. I think after this acquisition, it's going to get a lot worse for S&T and IBD within the next few years. Is Morgan Stanley the new Merrill Lynch?



 
PossumBelly:
They should hope so. Standalone IB on a global scale is a tough business. Despite the prestige among 19 year olds...the deals don't bring in the revs like trading and a wealth management.

What's your opinion on IB versus wealth management for a college kid going to a non targeted school for most of the BB's, interested in finance and seeking a stable and well compensated career? Granted that I am interested in both portfolio management and in the deal process?

 

WM is not portfolio management, WM is more client facing where you meet with clients decide which of the 4 mutual funds they would be good for and throw their money in.

IB you will get training and experience that will allow you to move onto other areas of finance more easily than WM. Of Course, IB is a lot more difficult to break in to than WM.

Fear is the greatest motivator. Motivation is what it takes to find profit.
 

I think this graphic is pretty useless without absolute numbers. You can't get a picture of what is really happening. Is IBD and ST actually declining or just declining as a percentage relative to the fast growing GWM/AM? If its the former than there is reason for hesitation, if its the later than I don't see it being a big deal.

 
ke18sb:
I think this graphic is pretty useless without absolute numbers. You can't get a picture of what is really happening. Is IBD and ST actually declining or just declining as a percentage relative to the fast growing GWM/AM? If its the former than there is reason for hesitation, if its the later than I don't see it being a big deal.
Gorman held executive positions at Merrill Lynch, and he was the former COO of MS GWM. I'm starting to wonder if he wants this to be the main source for revenue. Heavy losses in FI and regulations are killing their trading revenue, and deal flow isn't what it was in 2007, so that partly answers your question.
 
Bobb:
Is this really a surprise? UBS is basically doing the same as well. Wealth Management is extremely profitable and a lot less risky compared to other types of IB/Trading

Are you talking about the profit margin or in terms of gross revenues? WM seems to focus much more on client acquisition than portfolio advancement due to the 1-2% charge on the entire portfolio value - adding a 20M client to a 100M portfolio equals a 20% year on end appreciation of the portfolio except for the fact that getting clients (who are fine with 6-7% per year) is a lot easier than raising a large portfolio by 20%

 
Bobb:
Is this really a surprise? UBS is basically doing the same as well. Wealth Management is extremely profitable and a lot less risky compared to other types of IB/Trading
Yes, IBD/trading is in a slump right now and the boomers are retiring, so the shift serves multiple needs.

EDIT: misread part of original post.

Get busy living
 

MS just did the biggest IPO in memory and despite the events that occurred after it, many insist the bankers did their job and have gotten IPO bids since. ML has not had any IBD activity like that, so although the IB is not as large as it once was for MS, they are still a top presence on Wall Street unlike ML.

 
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