Morgan Stanley on Wednesday said it would keep its Discover credit card unit, resisting pressure from shareholders to sell it.
The company did say it would shed an aircraft leasing unit hurt by the weakened airline industry.
The decisions marked the first major strategic steps by John Mack, whom Morgan Stanley brought back seven weeks ago to replace Philip Purcell as chairman and chief executive. Shedding the leasing unit will result in a $1-billion third-quarter charge, but Morgan Stanley said the moves should increase profit over time.
"These are all steps in the right direction," said Anton Schutz, manager of the Burnham Financial Services Fund.
Shareholders who favored a sale of Discover had said the unit, long a drag on corporate growth, did not fit with the company's others businesses. But Mack said that after five months of intense study he wanted to hold on to the business because he was "convinced that Discover was not only a strong business, but also an attractive asset for Morgan Stanley."
Mack cited new growth opportunities at Discover, stable cash flow and its diversification of the securities firm's portfolio of businesses. Mack said the gains from a spin-off were not compelling.
Discover is one of the world's largest credit card issuers, with 50 million customers, and operates its own payment network.