Excerpts from the report are below.
On whether he personally wants to buy all of Smith Barney:
“It has nothing to do with what James Gorman wants, it’s got to do with what’s in the interest of your shareholders. You have got to take your ego out of it. We like that business, that’s why we doubled up. We have a very clear timeframe, we will follow that timeframe. We are always happy to listen if somebody wanted to accelerate that, but we feel no compulsion. The only talk we will initiate is to exercise our call option on May 31st. It’s never been on the table; it has been the media speculating. We have a game plan to buy 14, 15, and 20. It would take something extraordinary to knock us off that game plan. We are exercising the first call option, that’s all we have committed to, and we like the ability to buy the rest of the business over the two year time frame.”
On the brokerage business not meeting the 20% pretax margins he promised investors:
“Guilty as charged. We overpromised on one thing. We didn’t anticipate three years of zero interest rates; I don’t think many people did or you would have a lot of wealthy investors out there. We didn’t anticipate the kind of equity markets we have been in. What we didn’t over promise on was the importance of integrating these businesses. We are 11 weeks away from being the largest wealth manager in the world. Yes, we got ahead of ourselves on when they margins would be achieved, but we didn’t get ahead of ourselves on the attractiveness of the business and how it would look when we integrated. Cost savings are right on track.”
On whether not meeting their business promise hurts his credibility:
“We will get there. I think investors look at the complexity of all the things you talk about and how you perform. Our management team has delivered on nine of the ten things we said we would deliver on.”
On efforts to keep company costs under control:
“We are not planning for headcount reductions. We have been very tight on non-compensation expenses. We manage this company with a lot of discipline and we are not about to swing for the fences, we are going to maintain control of our costs, and we will deliver results for our shareholders.”
On whether Morgan Stanley would be able to survive another financial crisis and run on the banks:
“A lot has changed. The short answer is yes of course we would, but we are not the same firm we were in 2008.”
On how long he sees himself as CEO of Morgan Stanley:
“I’m not really thinking about the end of it; we are still at the beginning. We have a lot of wood to chop.”
On whether he is interested in buying other banks:
“I don’t think any of the big banks would be in an acquisition mode now. Most of them are conserving capital. No, we are not interested in acquisitions right now.”
On investor’s concerns about buying brokerage stock:
“You buy things based on value, not based on absolutes. There is justification for our stock to be trading where it is, except for the hangover from the financial crisis and the macro uncertainties. I think these earnings will be part of the inflection point that gets us back to more reasonable values.”
- CEO Buys, CFO Buys: Stocks that are bought by their CEO/CFOs.
- Insider Cluster Buys: Stocks that multiple company officers and directors have bought.
- Double Buys:: Companies that both Gurus and Insiders are buying
- Triple Buys: Companies that both Gurus and Insiders are buying, and Company is buying back.