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Morgan Stanley 'Confident' About Its New Direction: CEO

Morgan Stanley hopes to buy the rest of the Smith Barney business this year as it continues to re-position its business, CEO James Gorman told CNBC's "Squawk on the Street"on Wednesday.

"We are confident as a management team about the direction we are now headed in," Gorman said from Davos, Switzerland "specifically the potential to buy the rest of Smith Barney and create one of the top three wealth managers in the world."

Even if regulators do not approve its application to buy the rest of the Smith Barney business this year, Gorman said they have a longer term schedule over two years to buy it in.

With much of the workforce integrated, the Morgan Stanley executive said Smith Barney is well positioned to benefit from any increase in investor confidence and a shift out of bonds and into equities.

(Read More: Morgan Stanley Swings to Profit, Beating Expectations)

Gorman has been "bullish" on the economic environment for several months and noted that the U.S. economy is turning, the Eurozone is no longer in danger of breaking up and China is making its leadership transition.

"All of those three things are more positive than where we've seen at any point in the last several years," Gorman said.

In terms of returning capital to shareholders, Gorman said Morgan Stanley's capital planning is strategic.

"Let's get the Smith Barney business under our wing, and then we'll move on to the discussions around buybacks and dividends," he said.

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