morgan stanley vault guide

8/8/2019 Morgan Stanley Vault Guide

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II Morgan StanleyPRESTIGERANKING

KEY COMPETITORS1585 Broadway

New York, NY 10036

Phone: (212) 761-4000

Fax: (212) 762-0575

www.morganstanley.com

Citi

Goldman Sachs

J.P. Morgan

Lehman Brothers

UBS Investment BankBUSINESSES

Institutional Securities

Investment Management

Global Wealth Management UPPERS

THE STATS Hard to beat the prestige

"Very motivated" and "professional" staff

Employer Type: Public Company

Ticker Symbol: MS (NYSE)

Chairman & CEO: John J. Mack

Net Revenue: $5.49 bi llion (FYE 11/07)

Income: $1.47 bil lion (FYE 11/07)

No. of Employees: 45,506

No. of Offices: 661

DOWNERS

"Six-and-a-half days a week in the office is

normal"

Still a bit of an "old boy's club"

EMPLOYMENT CONTACT

www.morganstanley.com/about/careers/index.html

THE BUZZ, , W HA T IN S ID E R S A T O TH E R F IR M S A R E S A Y IN G AB O U T TH IS F IR M

"Great reputation, consistently rated among the best"

"Very strong franchise but very stiff culture"

"Classic investment bank; old institution based on

traditional values"

"Had a couple of tough years so no longer in line

with Goldman, but right up there"

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Vault Guide to the Top 50 Banking Employers 2009 Edition

Morgan S tanle y

THE SCOOP

Strong second

One of the leading investment banking firms in the w orld, Morgan Stanley's business is divided into three practice areas:

investment management, wealth management and institu tional securities. Morgan Stanley Investment Management (MSIM)

provides global asset management products and services , including equity, fixed income alternative investments and a direct

investing business. The fum's global wealth management unit caters to individuals and small- to medium-sized businesses and

institutions, offering retirement plan services, brokerage and investment services, financial and wealth planning, annuity and

insurance, credit, trust and banking, and cash management . And the institutional securities unit covers Morgan Stanley's world-

renowned investment banking, sales, trading, financin g, research and risk management analytics operations. An M&A

powerhouse, Morgan Stanley again ranked No.2 in both announced worldwide and announced U.S. M&A deal volume, trailing

its arch advisory nemesis Goldman Sachs. In Europe, tho ugh, Morgan nabbed the top spot in announced deals. Overall, in 2007,

Morgan Stanley advised on 431 M&A deals worldwide w orth a total of $1.3 trill ion.

The Morgan Stanley story began in 1935 with just two p artners: Harold Stanley and Harry Morgan, who left their jobs with J.P.

Morgan in New York to open a self-ti tled securities firm, In 1997, the fum became Morgan Stanley Dean Witter after a merger

with Dean Witter, Discover & Co., which had launched in San Francisco in 1924. In 2007, the Discover unit was spun off, which

was hailed a smart step for Morgan Stanley. The bank h ad managed to increase the unit's revenue in 2006 after disappointing

results in 2005, but still, many investors and analysts felt the bank should concentrate on its core investment banking and

institutional trading businesses. And so Discover bec ame independent again. Under the terms of the divestiture deal,

shareholders received one share of Discover stock for ev ery two shares of Morgan Stanley. Morgan Stanley kept no Discover

shares for itself, and the new stand-alone Discover began trading in July 2007 on the New York Stock Exchange under the symbol

DFS. Morgan Stanley, meanwhile, trades under the ticke r symbol MS (which replaced its former symbol, MWD).

Credit losses

The exuberance of a healthy market came to a screeching halt for many of the big investment banks in 2007, with losses in the

credit crunch dampening the enthusiasm of those who th ought the party might never end. Morgan Stanley'S third quarter 2007

earnings reflected the realit ies of these losses, with profi ts dropping to $l.54 billion, a 17 percent versus the firm's 2006 third

quarter earnings. The driving factor in Morgan Stanley's losses was a write-down of $940 million in leveraged loans, but it also

reported $480 million in losses on its quantitative equity funds.

There was a silver lining in the numbers: the performance of the brokerage and asset management division. Brokerage reported

profit increases of 9 percent while asset management pos ted an impressive increase of 62 percent. Revenue from commissions

also increased from $880 billion to $1.3 billion. At the time the third quarter earnings were reported, Chief Financial Officer

David Sidwell said that the losses would not deter Morga n Stanley going forward, stating that "Risk is crucial to our survival."

Changes afoot

In November 2007, Morgan Stanley CEO John Mack ma de some management changes in the wake of the billions in losses tied

to subprime loan trading. The most notable (and surpri sing) departure was that of co-president Zoe Cruz, who had overseen

Morgan Stanley's trading and risk operations. Cruz (the 1 6th most powerful woman in the world, according to Forbes magazine)

was widely seen as Mack's most likely successor in the C EO's office, and earlier, Mack had insisted that she would not be fired

because of the large trading loss. But as the bank faced a dditional multibillion-dollar write-downs, the largest losses in Morgan

Stanley's history, he changed his mind. According to New York magazine, in its cover story entitled "Only the Men Survive,"

the 52-year-old Cruz was called into John Mack's office one day in November 2007 and promptly fired. Ten minutes later, she

left Morgan Stanley's headquarters, and never returned.

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Morgan S tanle y

On December 1, 2007, Walid Chammah and James Gorman were installed as new co-presidents of the firm. Chammah, who had

been serving as global head of investment banking and CEO of Morgan Stanley's international operations, now oversees the

institutional securities division. Gorman, who had been chief operating officer of the global wealth management group, oversees

wealth management and asset management.

At the same time, Mack created a new office of the chairman, installing Robert Scully as its head. Scully's task is to build

relationships with key clients, especially global sovereign investors. Michael "Mitch" Petrick, head of Morgan Stanley Principal

Investments, was appointed to oversee the firm's trading business and serve as co-head of institutional securities sales and

trading.

Not a happy holiday for Morgan Stanley

The reasons for Mack's shakeups became apparent when Morgan Stanley released its 2007 fourth quarter eamings reports: for

the first t ime since 1986, the firm posted a quarterly loss. The $3.7 billion write-down from the fall had been just the beginning

of the bad news. The firm added more than $5.5 billion more in U.S. subprime and other mortgage-related expenses at the end

of the year, for a total write-down of $9.4 billion---one of the worst on Wall Street. Many jobs in Morgan Stanley's global

mortgage divisions were cut, too.

In a statement about the earnings report , Mack called the write-down "deeply disappointing," and added that he would not takea bonus for 2007. "Ultimately, accountability for our results rests with me, and I believe in pay for performance." At the same

time, he tried to reassure investors that Morgan Stanley's troubles were both isolated and contained. "Across the firm, we have

moved aggressively to make the necessary changes, and these isolated losses by a small trading team in one part of the firm

should not overshadow the momentum we see in virtually all of our other businesses."

Indeed, Morgan Stanley's non-mortgage businesses had a fairly strong year. Investment banking revenue was up 31 percent over

2006, climbing to a record $5.5 billion. This result was driven by gains in advisory revenue, which was up 45 percent from the

previous year. Underwriting revenue also increased 21 percent. Global wealth management and asset management both

delivered record results, thanks to both increased productivity and increased client business. Fixed income sales and trading

posted 62 percent gains in interest rate and currency products, mortgage woes notwithstanding, and fixed income underwriting

revenues of $1.4 billion set a new firm record. Equity sales and trading saw revenue rise 38 percent from 2006, with much of

the growth coming from the prime brokerage and derivatives businesses.

Less hare, more tortoise

In December 2007, the battered Morgan Stanley followed Citigroup and UBS down a familiar road-to overseas investors. Like

other major U.S. banks, Morgan Stanley turned to foreign investment groups for capital after recording losses from the home

loan market. The China Investment Corporation, that country's sovereign wealth fund, gave Morgan Stanley $5 billion in

exchange for a 9.9 percent stake in the firm. (Citi's cash infusion came from investors in Abu Dhabi, while UBS got its funds

from Singapore and the Middle East.)

Morgan Stanley assured its other shareholders that China's stake was "passive," and the CIC would have no influence on the

bank's directors. CEO Mack added that the move was strategic, not just necessary. He called it "an important step in increasing

the flow of capital between our countries and across these increasingly crit ical markets." Stil l, in conversations with reporters,Mack signaled that a more conservative era may be on the rise at Morgan Stanley. "We had been sprinting," he told The NewYork Times. ''Now we will be jogging. But we are in a risk business, and we will be in the market trading risk."

Out of the vvoods?

Despite the setbacks, Morgan Stanley ended up ahead of expectations when the first quarter of 2008 rolled around. While the

company's overall profits were down 42 percent from the year before and revenue decreased 17percent from the first quarter of

2007, Morgan Stanley still managed to surpass analysts' predictions. But the firm was hardly in the clear. The firm's equity

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Morgan S tanle y

trading group managed to bring in the best quarter in its history, but Morgan Stanley also took two write-downs, worth a

combined $2.3 bill ion, related to its mortgage and loan b usinesses.

In the first quarter of 2008 Morgan Stanley also had mo re deals in the pipeline. Designer Tommy Hilfiger, whose brand was

taken private by Apax Partners, hired Morgan Stanley to manage a forthcoming IPO. And in February 2008, news broke that

Morgan Stanley and The Blackstone Group were advising Microsoft on its $44.6 billion bid for Yahoo.

Morgan Stanley also announced some restructuring effort s in February 2008 that not only resulted in the closing of its mortgage

lending unit, Advantage Home Loans, but also 1,000 job cuts in operations, technology, asset management, and other units in the

U.S. and in England.

Expectations versus reality

Although Morgan Stanley's second quarter 2008 results b eat analysts' estimates, they were still much lower than the same period

a year earlier. The firm posted net income of$1.02 bill io n, down from the $2.36 billion it booked in the second quarter of 2007.

(The latest profit numbers would've been a lot lower if n ot for one-time gains due to the sale of its wealth management unit in

Spain and a secondary offering of MSCI stock.) Meanwh ile, net revenue decreased 38 percent to $6.5 bill ion, with nearly all of

the firm's units reporting lower revenue figures. Investme nt banking saw revenue dive 49 percent compared to the second quarter

of 2007, while the firm's fixed income and trading divisi on experienced an 85 percent fall.

GETTING HIRED

Try the back vvay

Getting a job offer with Morgan Stanley may begin with a typical job seeker 's move, such as answering an online job posting-

but that's certainly not the only way to begin your tenu re there. The firm recruits at colleges, and one insider "applied to a

position through a job board" without knowing the positi on was with Morgan Stanley. "A head hunter got back to me and said

I just applied with Morgan Stanley, and set up the intervi ew," adds the insider.

But you can also go the old-fashioned way (in this techn ological age, at least) and check out the careers section of its web siteand read all about the current openings with the firm. T he main page provides links to three key areas: university-level jobs,

experienced-level employment and the financial adviso r program. The university section provides information about the

company, detailed descriptions of available programs, o rganized by department and education level, an on-campus recruiting

calendar, profiles of current Morgan Stanley employees; i nterview tips and recruiting videos from various groups within the firm.

Applicants can search for jobs within functional area, lo cation, key word and line of business.

Internships are also a very good way to get your feet we t at the firm-and the pay's not bad, either. "Interns are paid as first-

year analysts, just with no bonus," explains one insider. Sources say if you're lucky enough to land a summer internship, you've

just about got it made. "A large percentage of my summ er class got offers to return full time," reports one banker.

For the long haul

As far as interviews go, expect at least two or three rounds -maybe four-including the possibility of "a Super Day in the offices

with six interviews back to back." "I had three additional rounds [after the on-campus interview], all in New York," reports one

contact. An MBA student interviewing for an internship had a similar experience. He says the "extensive interview process

started with on-campus interviewing, then continued wit h a series of three callbacks in New York." A contact in Europe says,

"Associates have four to five rounds, which are pretty in tense." The source also says even if you do land a job at Morgan, you

might still have to do some more interviewing. "Summe r interns applying for full-time jobs go through an M&A game where

they work with senior people on a simulated M&A case. It lasts all day long." And during your interviews, anticipate that more

or less "all questions" asked to be based off of your resu me.

Visi t the Vault Finance Career Channel at www.vault.com/finance-with insider firm profiles,

message boards, the Vault Finance Job Board and more." 'A U . 'T CAREER, L. LIBRARY 55
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Morgan S tanle y

OUR SURVEY SAYS

Busy but professional

It's a "very motivated," "professional," ' 'respectful' ' and busy" environment at Morgan Stanley, and "everybody seems to want

to serve." But it also "feels like everybody is running a marathon" and to that end, "you have to be very energetic and willing

to adapt to changes."

But all in all, Morgan Stanley is a "good company to work for as it does provide a wide range of benefits," including "401(k)

with an employer match," "tuition reimbursement," "medical, dental, vision and life insurance," ''vacation and sick time,"

"flexible hours" and a "team/family environment."

And Morgan Stanley's compensation receives high marks from sources. The firm also offers a "gym membership subsidy," "a

$25 dinner allowance," "cabs after 9 p.m.," "discounted Morgan Stanley stock" and "a car service home after 10 p.m."

Settle in

Work hours "tend to be long." While ' 'the hours were typically market hours," workers have a tendency to go above and beyond

the call of duty of a regular basis. "Most employees arrive early and remain long after the market closes." Sources also report

that "six-and-a-half days a week in the office is normal," and add that it's standard to "start early-around 7:30--and leave

around 6 or 7 p.m." One insider admits that when it comes to hours spent at the office, "Morgan is tough---even for an I-bank."

Melting pot?

Diversity, some insiders say, is "very good"-although others say "a more diverse culture is severely warranted for this white-

shoe firm." And while Morgan Stanley may get a passing grade on the ethnic diversity front-one insider says the bank is ''well

diversified and includes international employees"-its treatment of women may leave a litt le to be desired. One contact reports

that ' 'the culture is not friendly toward women," and another adds somewhat resignedly that "banking is one of the oldest boys'

clubs in the world-and I have no idea how to change it." That said, four women sit on Morgan Stanley's management

committee and two women have seats on its board of directors. In addition, Morgan Stanley has been named one of the Top 50Companies to Work For by Working Mother magazine for five consecutive years, and the firm offers several women-specific

initiatives such as conferences, workshops, internships and a women's employee networking group with over 900 members.

As for the firm's immediate outlook, one insider notes, "We just had a massive layoff across regions and divisions due to the

subprime crisis," adding, "The company's overall strategies are still on right track, but there is inevitable aftereffects oflayoffs-

and some good people had to leave." Another contact says that the tough times are not Morgan Stanley-specific: "Right now,

the banking industry in general is going through a rough time due to the economy."

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morgan stanley vault guide

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