CEO of largest U.S. bank to resign

Mack, 64, will step down at the end of the year and remain chairman of the New York-based bank for at least two years, he said in an interview yesterday. Gorman, 51, will become CEO and Walid Chammah, 55, co-president with Gorman since 2007, will relinquish that role and remain chairman of Morgan Stanley International in London. The changes take effect Jan. 1.

In more than four years leading the firm, Mack sought to improve profits and repair divisions that appeared under former CEO Philip Purcell. Mack’s strategy of boosting trading risks backfired in 2007 when bad bets led to the firm’s first quarterly loss.

While the company survived the financial crisis that devastated some rivals, Morgan Stanley has lost money since the third quarter of 2008 and reined in trading even as Goldman Sachs Group Inc. earnings hit an all-time high.

“Mack has been beaten up a little for not taking as much risk in the capital markets as Goldman,” said Matt McCormick, a banking industry analyst at Bahl & Gaynor Inc. in Cincinnati, which manages $2.3 billion.

“He was given a tough job, I think he handled it above average and history will judge him a solid leader on Wall Street.”

Morgan Stanley slashed the assets on its balance sheet by almost a third to $677 billion at the end of June from $987 billion at the end of August to cut its reliance on leverage, or borrowed money.

The firm’s average value-at-risk, a measure of how much the company estimates it might lose in a day’s trading, was $154 million in the second quarter compared with $245 million at Goldman Sachs.