[ by Melanie Gretchen ]

Morgan Stanley CEO James Gorman probably has 1 or 2 more quarters to demonstrate that he is the man for the job, sources said.  What's at stake is whether he can can structure Morgan Stanley as a stable investment bank that can weather the storm of fixed-income trading through to healthy profits.

What he's facing:

• fixed-income sales and trading revenue fall 59% to $770 million compared to $1.9 billion a year earlier
• internal and external pressure to execute on a strategy he implemented upon taking the reins at the firm 2 years ago
• rumors that it might cut its fixed-income trading to bare bones, slashing workers, and offer a larger stake to Japanese investor Mitsubishi UFJ
• the fact that much of the firm's future success depends on the Morgan Stanley Smith Barney brokerage platform, of which it is scheduled to take full ownership from Citi at a $13.5 billion valuation as early as 2015.

"Mr. Gorman has nailed his personal flag to the mast of wealth management. MSSB has to succeed for James to succeed." -- Brad Hintz, a bank analyst at Sanford Bernstein.

Raising Hope. When Mr. Gorman assumed the role of CEO, he promised the brokerage business would offer a less capital-intensive business that provides consistent return even in tough times.  Disappointing results, coupled with fixed income woes, have not widespread confidence won.  Nevertheless, the firm's shares have been on the upswing (trading up 17.1% over the past year to a close at $17.42 on Wednesday), and Mr. Gorman feels he has the right model in place, sources said.

"James knows now that it’s all about execution." -- One insider.

For further details, go to [NY Post, 9/13/12].