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    MS
    Earnings call· Jun 2025(Q2 FY25)

    MORGAN STANLEY Q2 FY25 earnings call MS

    Jul 16, 2025 Source

    Executive summary

    Morgan Stanley Q2 FY25 — Strong Performance Driven by Wealth Management and Equities, Regulatory Tailwinds

    Morgan Stanley delivered strong Q2 FY25 results, showcasing the resilience of its integrated model amidst market volatility. The firm's strategic investments in Wealth and Investment Management continue to drive organic growth and durable fee-based revenues, while the institutional franchise demonstrated strength in equities and a rebound in investment banking activity. Management anticipates a more constructive regulatory backdrop and remains focused on capital deployment for growth and shareholder returns.

    Highlights

    5

    • Firm delivered $16.8 billion in revenue, $2.13 in EPS, and an 18.2% ROTCE for Q2 FY25.

    • Wealth Management achieved record pretax profit of $2.2 billion and margins over 28%.

    • Net new assets in Wealth Management were strong at $59 billion, despite $22 billion tax outflows.

    • Equities markets business delivered robust revenues of $3.7 billion, with Prime brokerage achieving a record.

    • Investment Management reached a record $1.7 trillion in AUM and generated $11 billion in positive long-term net flows.

    Concerns

    4

    • Advisory revenues declined to $508 million due to lower completed activity.

    • Fixed income underwriting revenues declined versus the strong prior year, primarily due to lower noninvestment-grade issuance.

    • ISG lending provisions were $168 million, driven by portfolio growth and a moderately weaker macroeconomic outlook.

    • Commodity results primarily reflected lower revenues in power and gas and fewer structured trades.

    Guidance & targets

    2
    CategoryTargetConfidence
    Net Interest Income (NII)
    remain around recent levels
    medium materiality
    Medium
    Effective Tax Rate
    approximately 24%
    low materiality
    High

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Institutional Securities
    Supported by equity and fixed income markets franchises, with regional strength in Asia and EMEA. Investment banking activity rebounded in June, partially offsetting year-over-year declines in debt underwriting and advisory. Prime brokerage revenues were especially strong, achieving a record.
    Investment banking revenues: $1.5 billionAdvisory revenues: $508 millionEquity underwriting revenues: $500 millionFixed income underwriting revenues: $532 millionEquities revenues: $3.7 billionFixed income revenues: $2.2 billionOther revenues: $202 millionISG lending provisions: $168 millionNet charge-offs: $19 million
    		$7.6 billion———
    Wealth Management
    Delivered strong net new assets, exceptional fee-based flows, and healthy lending growth. Margin continued to expand, showcasing operating leverage. Underlying business progressed towards a long-term goal of 30% pretax margin.
    DCP impact on revenue: $292 millionDCP negative impact on margin: 70 basis pointsAsset management revenues: $4.4 billionAsset management revenue growth: 11% YoYFee-based flows: $43 billionFee-based assets: $2.5 trillionNet new assets: $59 billionHeadwind from tax outflows: $22 billionTransactional revenues: $1.3 billionTransactional revenues growth: 17% YoYBank lending balances: $169 billionTotal deposits: $383 billionNet interest income: $1.9 billion (flat sequentially)
    		$7.8 billion——Pretax profit: $2.2 billion, Pretax margin: 28.3%
    Investment Management
    Achieved record AUM and strong long-term net flows, driven by global distribution and demand for Parametric's customized portfolios. Gains in infrastructure funds contributed to performance-based income.
    Total AUM: $1.7 trillionLong-term net flows: $11 billionYear-to-date inflows: $16 billionAsset management and related fees: $1.4 billionPerformance-based income and other revenues: $118 millionLiquidity and overlay services outflows: $27.3 billion
    		$1.6 billion12% YoY——

    Operational metrics

    25
    Revenue
    $34.5 billion
    H1 FY25

    Firm-wide revenue for the first half of fiscal year 2025.

    EPS
    $4.73
    H1 FY25

    Firm-wide EPS for the first half of fiscal year 2025.

    Return on Tangible Common Equity (ROTCE)
    20.6%
    H1 FY25

    Firm-wide ROTCE for the first half of fiscal year 2025.

    Sequential Quarterly EPS
    $2.02, $1.82, $1.88, $2.22, $2.60, $2.13
    Past 6 quarters

    Durable earnings over six sequential quarters.

    Efficiency Ratio
    70%
    YTD FY25

    Firm's year-to-date efficiency ratio.

    CET1 Ratio
    15%
    Q2 FY25

    Standardized CET1 ratio.

    Standardized RWAs
    $523 billionincreased sequentially
    Q2 FY25

    Standardized RWAs increased sequentially as clients were actively supported.

    Quarterly Dividend per Share
    $1.00increased by $0.075
    Q3 FY25 onwards

    Quarterly dividend increased by $0.075, bringing it to $1 per share.

    Quarterly Tax Rate
    22.7%
    Q2 FY25

    Reflecting global mix and level of earnings.

    Total Spot Assets Increase
    $54 billionfrom prior quarter
    Q2 FY25

    Total spot assets increased from the prior quarter to $1.4 trillion.

    Total Spot Assets
    $1.4 trillion
    Q2 FY25

    Total spot assets at the end of the quarter.

    Share Buyback Pace
    $4 billion
    Per annum

    Current pace of share buybacks.

    Total Client Assets
    $8.2 trillion
    Q2 FY25

    Total client assets across Wealth and Investment Management.

    Workplace Originated Net New Assets
    70%
    Q2 FY25

    Percentage of flows originating from workplace that are net new assets to the firm.

    Workplace Originated Flows (Historical)
    $16 billion
    Per year (historical)

    Historical annual flows originating from workplace, now running ahead of this number.

    Total Deposits
    $383 billion
    Q2 FY25

    Total deposits in Wealth Management.

    Individual Relationships
    20 million
    Q2 FY25

    Total individual relationships across three channels.

    AUM
    $1.7 trillion
    Q2 FY25

    Total AUM reached a record.

    Wealth Management Total Addressable Market (TAM)
    $60 trillion
    Current

    Estimated current total addressable market for Wealth Management.

    Investment Banking Fees
    $1.5 billion
    Q2 FY25

    Total investment banking revenues, with breakdown by product.

    Equities Revenues
    $3.7 billion
    Q2 FY25

    Robust equities revenues, with Prime brokerage achieving a record.

    Fixed Income Revenues
    $2.2 billion
    Q2 FY25

    Fixed income revenues driven by strength in macro products.

    Wealth Management Net New Assets
    $59 billion
    Q2 FY25

    Strong net new assets inclusive of tax outflows, reflecting growth across channels.

    Wealth Management Fee-based Flows
    $43 billion
    Q2 FY25

    Very strong fee-based flows, marking a record excluding previous asset acquisitions.

    Wealth Management Bank Lending Balances
    $169 billionincreased sequentially
    Q2 FY25

    Increased sequentially, predominantly driven by growth in securities-based lending.

    Industry KPIs

    1
    MetricValueDetails
    Net interest income$1.9 billionUSD

    Risks & headwinds

    4
    Market volatility and geopolitical uncertaintyQ2 FY25

    The second quarter unfolded with two distinct halves. The first half began with uncertainty and market volatility associated with the U.S. trade policy and the second half ended with increasing engagement and a steady rebound in capital markets.

    Mitigation: Firm's integrated model and multiyear investments in client franchise and global footprint allowed navigation of volatility and capture of momentum.

    Moderately weaker macroeconomic outlookQ2 FY25

    ISG lending provisions were $168 million, driven by portfolio growth and a moderately weaker macroeconomic outlook.

    Lower noninvestment-grade issuanceQ2 FY25

    Fixed income underwriting revenues declined versus the strong comparative period, primarily due to lower noninvestment-grade issuance.

    Lower revenues in power and gas, fewer structured tradesQ2 FY25

    Commodity results primarily reflected lower revenues in power and gas, and fewer structured trades compared to the previous period.

    What to watch in Q3 FY25

    5

    NII trajectory

    Q3 FY25
    Currentaround recent levels
    TargetStability or growth, subject to policy rate changes.

    Why it matters

    NII is a key component of bank profitability, and its trajectory will indicate the impact of policy rate changes and deposit dynamics.

    As we look ahead to the third quarter, we would expect NII to remain around recent levels, subject to changes in the policy rate.

    Q&A highlights

    8

    How will the firm's integrated franchise and regulatory changes impact incremental return on capital and future profitability, especially given current targets?

    Ted Pick stated that the business model is generating earnings growth and excess capital, increasing flexibility. Organic deployment is happening in investment banking (credit extension, coverage), Wealth Management (broadening lending, E*TRADE, workplace), and Markets (prime brokerage, secured lending). Inorganic opportunities are considered but the bar is high, focusing on strategic alignment and operating leverage. Regulatory reform is seen as a tailwind, affording more running room for core lending.

    “The business model, as we sit here, is generating earnings growth and incremental excess capital, which continues to grow our flexibility. We are, as we speak, deploying additional capital into the core businesses.”

    asked by Ebrahim Poonawala · answered by Ted Pick

    2 min read6 chapters

    Detailed Narrative

    01

    Market Dynamics and Strategic Resilience

    The second quarter was characterized by two distinct halves, starting with market uncertainty🌐 due to U.S. trade policy and ending with increased engagement and a capital markets rebound. Morgan Stanley's integrated firm strategy allowed it to navigate this volatility, delivering consistent performance and demonstrating operating leverage even in a murky environment. The firm's multiyear investments in its client franchise and global footprint are yielding results, positioning it to capture momentum as market conditions improve.

    02

    Wealth Management Growth Engine

    Wealth Management continues to be a significant growth driver, achieving record pretax profits and expanding margins. The firm's strategy to attract new advisors and leverage its workplace channel is successfully generating net new assets, with 70% of flows originating from workplace being net new to the firm. Fee-based flows are robust, indicating a continued shift towards advisory services and supporting durable recurring revenues.

    03

    Institutional Securities Rebound

    After a slowdown in April and early May, investment banking activity, particularly equity underwriting, saw a strong rebound in June. This recovery, driven by broad-based strength across products and regional contributions from Asia Pacific, suggests renewed corporate and investor confidence. The M&A backlog is building, with a thematic focus on growth in healthcare and technology, and the IPO pipeline is balanced globally.

    04

    Capital and Regulatory Environment

    Morgan Stanley maintains a strong CET1 ratio of 15%, significantly above its forward capital requirement, providing flexibility for capital deployment. Management notes progress in bank regulatory reform, including the new SLR proposal and potential CCAR reform, which suggests a constructive reevaluation of the total capital framework. This environment is expected to afford the firm more running room for core lending products and strategic growth.

    05

    Investment Management Scale and Flows

    Investment Management achieved record AUM of $1.7 trillion, driven by strong long-term net inflows of $11 billion in Q2 FY25. The firm is leveraging its global distribution capabilities, with particular success in fixed income strategies and the Parametric platform, to generate sustainable growth in fee-based revenues. Outflows from liquidity and overlay services were largely attributed to deployment into markets and corporate CapEx, indicating client confidence.

    06

    Capital Allocation Strategy

    The firm's capital allocation priorities include a $1 per share dividend, which is paramount for durability and shareholder expectations. Incremental capital deployment will support organic business growth, opportunistic stock buybacks, and selective inorganic opportunities that align with the core strategy and offer clear operating leverage. The bar for acquisitions remains high, focusing on those that enhance the existing wealth and investment banking franchises.

    AI-generated summary of the company’s earnings call. Not investment advice.