Morgan Stanley chief executive Philip Purcell last night yielded to calls for him to step down from investors unhappy with dozens of departures from the investment bank and years of listless stock performance.
Mr Purcell (61) announced his retirement after a series of board meetings that began on Wednesday.
He offered to quit to spare the firm the distraction of a long battle with a group of retired executives, one insider at Morgan Stanley said.
"It has become clear to me, in light of the continuing personal attacks on me, and the unprecedented level of negative attention our firm - and each of you - has had to endure, that this is the best thing I can do," Mr Purcell said in a letter to employees.
But several analysts said they believed the board asked Mr Purcell to quit as employee resignations continued to mount.
"Investment banks are only as good as their people and, in the last six months, there has been a talent drain at Morgan Stanley," said Michael Santelli, a portfolio manager at Allegiant Asset Management in Cleveland.
Nine derivatives staffers on Friday joined an exodus of over 30 bankers and traders since late March when Mr Purcell ousted some well-regarded executives and installed leadership who supported his plans for an integrated securities firm.
Analysts and investors warned that the bank would be hobbled if the wave of defections continued.
Morgan Stanley also warned yesterday that it expects its second-quarter profit to fall about 15 per cent to 20 per cent from a year-earlier, to about 88 cents to 94 cents a share.