(Rewrites first paragraph, adds Gorman comments on the CEO choice in paragraphs 9 and 15 and on block trading probe in paragraphs 21-22, and Pick comments on market environment in paragraph 13)

Oct 25 (Reuters) - Morgan Stanley's Ted Pick won the race to succeed long-time CEO James Gorman and on Wednesday promised to stick to the blue chip Wall Street firm's strategy as it navigates a deal-making slump and uncertain economic outlook.

The investment bank said Gorman, who has held the top job since 2010 and steered the bank in the aftermath of the 2008 financial crisis, will become executive chairman and may stay a full year to help with the transition.

Pick, 54, a three-decade company veteran who heads the institutional securities division, home to the bank's investment banking and trading unit, had been the favorite to win a three-man race against insiders Andy Saperstein and Dan Simkowitz.

"We have two great businesses, the strategy is intact, there is a change in leadership but no change in strategy," Pick said in an interview.

Still, Pick will have to deal with a tumultuous investment banking backdrop which has damaged earnings, an investigation by U.S. regulators into its block trading practices, and managing relationships with the two peers who lost out on the top job.

Meanwhile, the absence of women from the slate of potential candidates underscored Wall Street's diversity gap.

Saperstein, who leads wealth management, will remain co-president and head of wealth, and take on additional responsibilities overseeing investment management. Simkowitz, head of investment management, will become co-president and head of institutional securities.

Pick, who joined Morgan Stanley in 1990 and will take over as CEO on Jan. 1, ran equity capital markets during the financial crisis and was appointed head of sales and trading in 2015.

Prior to his current role, he was the global head of sales and trading and engineered a turnaround of the firm's fixed income division. Gorman said the turnaround was a difficult time in which he saw Pick could make "tough calls" and keep people motivated.

That could stand him in good stead as Wall Street recovers from a dealmaking slump, some analysts said.

"The expectation is that the growth of mergers and acquisitions in the next couple of years will be high and that has been Pick's core competency so we view it as a good move," said Brian Mulberry, client portfolio manager at Zacks Investment Management, which held Morgan Stanley stock in the past.

Mulberry said Pick also added "stability and experience" that the bank had been "missing as this succession discussion has been going on."

The new CEO acknowledged the market is "challenging" but did not have any "bearing on how we're thinking about the strategy."

Gorman announced in May that he planned to step down within a year, and some investors had hoped the succession would be announced at the bank's Oct. 18 earnings. The stock sank, with one analyst citing the lack of a public plan on the new CEO.

Gorman said the bank had kept to timetable and had announced it after its October board meeting, adding that Pick, chosen for his leadership abilities and "mental toughness," had received a standing ovation from the board after being informed. The bank targeted this month so the new CEO could get a "running start" to begin in January, he said.

GORMAN'S LEGACY

Gorman joined Morgan Stanley in February 2006 and was named co-president the following year. As the 2008 financial crisis unfolded, threatening to topple some of Wall Street's biggest firms, Gorman had a front-row seat alongside then-CEO John Mack.

Gorman was named CEO in January 2010 at the same time as his counterpart Brian Moynihan at Bank of America. Both executives, along with JPMorgan Chase & Co's Jamie Dimon, have led their respective firms through the wreckage of the financial crisis.

Analysts also hailed Gorman's transformative deals in 2020 which saw Morgan Stanley buy discount brokerage E*Trade Financial Corp and Eaton Vance Corp.

"Morgan Stanley is generally in very good shape as left by Gorman," said Stephen Biggar, analyst at Argus Research.

"Large integrations like E*Trade and Eaton Vance are behind it and created some great diversification," said Biggar.

Gorman has vowed to stay to deal with the block trading probe, although said he couldn't comment on what is a Department of Justice and Securities and Exchange Commission matter.

"But I'm comfortable, in a position I'll be around to help fix up on the loose ends," he said.

Gorman, a music fan also known for his dry sense of humor, grew up in Australia. He earned bachelor's and law degrees from the University of Melbourne and an M.B.A. from Columbia University. He eventually became a U.S. citizen.

Gorman "guided a traditional, white-shoe investment bank through a transformative and successful evolution into a diversified, dynamic wealth management institution," said Ana Arsov, managing director at Moody's.

"As with all his endeavors, his succession has been well-planned, facilitating a smooth transition." (Reporting by Manya Saini and Niket Nishant in Bengaluru and Tatiana Bautzer and Lananh Nguyen in New York; additional reporting by Nupur Anand and Saeed Azhar, Editing by Megan Davies, Anil D'Silva, Devika Syamnath and Sonali Paul)