Colm Kelleher, who will take over as sole head of Morgan Stanleys investment bank as his counterpart and past rival Paul J. Taubman exits, now faces the challenge of improving returns at the firms biggest business.
Taubman will retire at the end of the year, the New York- based bank said yesterday in a statement. The move concludes an almost three-year dual-leadership role marked by enmity between Kelleher, 55, a gregarious former fixed-income salesman, and Taubman, 51, a reserved investment banker.
Chief Executive Officer James Gorman is relying on Kelleher to help improve earnings as the stock has traded below book value for most of Gormans tenure. Morgan Stanleys investment bank has posted a return on equity, a measure of profitability, of less than 4 percent in the first nine months of the year, trailing competitor JPMorgan Chase & Co.s 17 percent. In 2006, ROE at Morgan Stanleys investment bank was 30 percent.
We must continue our intense focus on improving ROE, Gorman, 54, said in an internal memo obtained by Bloomberg News. Aligning sales trading more closely with investment banking and capital markets will allow us to explore and extract new revenue opportunities within institutional securities and better manage our costs.
Kelleher and Taubman disagreed over how aggressively to push clients for additional business on the back of capital- markets deals, three former colleagues told Bloomberg News in 2011. Gorman, who met with the executives last year to settle tensions, recently decided that the division would win more of those deals with Kelleher running the entire unit, a person briefed on the decision said.
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