(Bloomberg) -- When James Gorman needed a new chief financial officer for Morgan Stanley, he looked in the same spot he found the last one.
Jonathan Pruzan, 46, will replace Ruth Porat as CFO next month, five years after he succeeded her running an investment- banking unit that serves other banks. Porat, 57, is becoming CFO of Google after teaming with Morgan Stanley CEO Gorman to stabilize the Wall Street firm's funding and increase capital.
The youngest of three brothers who built reputations in investment banking, Pruzan has spent almost all of his career at Morgan Stanley advising financial clients. That gave him a window into challenges he'll face as CFO, including working with regulators and convincing investors the firm is making progress toward its profitability goal of 10% return on equity.
"In the old days, it was a left brain, mechanical financier that would be CFO, but not today," U.S. Bancorp CEO Richard Davis, a client of Pruzan's, said in an interview. "The really good financial institution group folks know how to work through the social and the financial issues. "And social issues have a lot to do with the skill-set now of a CFO working with regulators or the Street.''
A native New Yorker and avid skier, Pruzan attended Horace Mann School and Tufts University before joining Paine Webber in 1990. Four years later, he moved to Morgan Stanley and rose through the ranks of its financial institutions group, known as FIG, which also is led by Eric Bischof and William Chalmers.
Pruzan advised on several of the biggest financial-industry deals of the past two decades, including Bank of America Corp.'s $48 billion purchase of FleetBoston Financial and General Motors's 2006 sale of a 51% stake in GMAC to a group led by Cerberus Capital Management.
In a 2007 Investment Dealers Digest profile, he described himself as not the type to sugarcoat things."
That trait suited him in 2008, when he was assigned to review Wachovia's $122 billion mortgage portfolio ahead of a potential merger with Morgan Stanley, according to "Too Big to Fail," the 2009 book written by Andrew Ross Sorkin. Pruzan's analysis showed loss expectations that made the deal impossible, according to the book.
In 2009, his team helped lenders raise capital to repay U.S. bailout funds. Since the crisis, Pruzan has advised banks facing new rules and annual Federal Reserve stress tests known as the Comprehensive Capital Analysis and Review, or CCAR, that determine how much firms can pay out to shareholders in dividends and buybacks.
"He understands the current regulatory environment, having shepherded clients through the Fed's stress test and CCAR processes," Gorman wrote Tuesday in a memo to employees. "He brings both great technical skill and proven leadership to this new role."
The Fed's test is a key part of Gorman's pledge to boost the portion of earnings Morgan Stanley distributes to shareholders. Gorman has said the firm's stability and its increased reliance on steady businesses such as wealth management will allow higher dividends and more share repurchases.
While the firm had to drop a request to buy back $4.9 billion in trust-preferred securities in this year's test, it won approval for a $3.1 billion common-stock buyback and a 50% increase in the quarterly dividend.
"They have done a lot of heavy lifting," said David Konrad, a New York-based analyst at Macquarie Group Ltd. "Returning capital to shareholders is the big goal."
Pruzan joins financial-institutions bankers that have taken CFO roles amid a dearth of deals since the crisis. The volume of mergers and acquisitions involving financial companies topped $1.3 trillion last year for the first time in seven years, after exceeding $2 trillion in both 2006 and 2007.
Ewen Stevenson left his role as co-head of financial institutions banking at Credit Suisse Group to take the CFO role at Royal Bank of Scotland Group Plc. Tom Stoddard left a similar banking role at Blackstone Group to become CFO of U.K. insurer Aviva Plc. Steve Crawford also worked in FIG banking at Morgan Stanley before serving as CFO of the firm from 2001 to 2004. He's now CFO of Capital One Financial.
The Pruzan name is well known on Wall Street. His brother, Robert Pruzan, is a co-founder of Centerview Partners, an independent investment bank started in 2006, and former CEO of Dresdner Kleinwort Wasserstein North America. Michael Pruzan was a banker at Goldman Sachs Group Inc. and worked at George Soros's private-equity business.
"Makes you wonder what they do at Thanksgiving," U.S. Bancorp's Davis said with a laugh.
Michael J. Moore is a reporter with Bloomberg News.