MORGAN STANLEY (MS)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered solid results: net revenues $16.8B, diluted EPS $2.13, ROTCE 18.2%; both revenue and EPS exceeded S&P Global consensus estimates, driven by strong Equities Markets and robust Wealth flows . EPS beat by ~$0.15 vs $1.98 estimate*, and revenue beat by ~$$0.77B vs $16.03B estimate*.
• Wealth Management posted net revenues $7.8B, pre-tax margin 28.3%, with record fee-based flows $42.8B and net new assets $59.2B; total client assets across Wealth and Investment Management reached ~$8.2T .
• Institutional Securities revenue $7.6B: Equities up 23% YoY to $3.7B (record prime brokerage), Fixed Income up 9% YoY to $2.2B; Investment Banking $1.54B reflecting a rebound in equity underwriting late in the quarter .
• Capital return stepped up: the Board raised the quarterly common dividend to $1.00 and reauthorized a multi-year share repurchase program up to $20B beginning Q3 2025, underpinned by CET1 ~15% and improving CCAR outcomes .
• Management tone constructive: healthy IB pipelines into H2, regulatory reform (SLR/CCAR) seen as tailwinds for capital deployment; Q3 NII expected “around recent levels” (policy-rate dependent) and H2 tax rate ~24% .

What Went Well and What Went Wrong

• What Went Well
  • Equities Markets strength: “prime brokerage revenues were especially strong, achieving a record,” with broad-based growth across products/regions; Equities revenue $3.7B (+23% YoY) .
  • Wealth momentum: “fee-based flows were very strong at $43B, marking a record,” net new assets $59B despite tax outflows, and margin expansion to 28.3% .
  • Capital return: dividend increased to $1.00 and $20B buyback reauthorization; management emphasized ongoing flexibility and focus on durable returns .
• What Went Wrong
  • Sequential softening vs Q1: firm net revenues down 5% QoQ ($17.7B → $16.8B); trading down vs Q1 as activity moderated from an exceptionally strong start .
  • Higher provisioning: provision for credit losses increased to $196MM (vs $135MM in Q1; $76MM in Q2’24), driven by corporate and secured lending growth and moderately weaker macro outlook .
  • Expense intensity: non-comp expenses up 5% QoQ and 9% YoY, reflecting higher execution-related costs and tech spend (firm expense efficiency ratio 71% vs 68% in Q1) .

Financial Results

Segment breakdown

Key KPIs

Vs. S&P Global Consensus

Values with asterisk (*) retrieved from S&P Global.

Guidance Changes

Other regulatory context: SCB prelim set at 5.1% for Oct 1, 2025–Sep 30, 2026; Board continuing review of Morgan Stanley’s downward adjustment request; final SCB expected before Oct 1 effective date .

Earnings Call Themes & Trends

Management Commentary

• CEO: “Total client assets across wealth and investment management climbed to over $8.2 trillion… We announced an increase of our quarterly common stock dividend to $1.00 per share… flexibility to deploy incremental capital.”
• CFO: “Pre-tax profit was a record at $2.2 billion, and the pre-tax margin was 28.3%… In the quarter, fee-based flows were very strong at $43 billion, marking a record.”
• CFO: “As we look ahead to the third quarter, we would expect NII to remain around recent levels, subject to changes in the policy rate… We expect a tax rate of approximately 24% in the second half of this year.”
• CEO: “With a CET1 ratio of 15%, we are 200 basis points plus above our forward capital requirement… which affords us ongoing flexibility to deploy capital.”
• CFO: “Fixed-income underwriting revenues were $532 million… declines primarily due to lower non-investment-grade issuance; equity underwriting accelerated towards the end of the quarter.”

Q&A Highlights

• Capital deployment and returns: management reiterated priority on dividend durability ($1/share) and tactical buybacks (~$4B annual pace), citing excess CET1 and expected regulatory reform (SLR/CCAR) as tailwinds .
• Boardroom tolerance to volatility: tariff execution within expected bands likely clears uncertainty; IB activity picked up late in quarter with sponsors/corporates engaged; constructive H2 outlook .
• Stablecoins/tokenization: actively evaluating landscape/use cases, but too early to quantify impact relative to MS’s businesses; staying close to broader technological evolution (AI/crypto) .
• Trading environment and share gains: Equities leadership across nine boxes (cash/derivatives/prime across regions); Europe record quarter; fixed income consistent ~$2B run-rate across environments .
• NII under rate cuts: offsets include potential sweep inflows and lending balance growth; NII trajectory sensitive to policy rate but expected to remain near current levels .
• Lending through capital markets: potential normalization of regulatory limits could allow large banks to regain share in corporate product/derivatives; MS intends prudent growth, leveraging integrated firm .
• Bank deposits eligibility: growing/ diversifying deposit base to support eligible bank assets; continued investment in banking rails across channels (adviser-led, E*TRADE, workplace) .

Estimates Context

• Q2 2025 EPS and revenue beat consensus: $2.13 vs $1.98* and $16.79B vs $16.03B*, driven by Equities Markets (record prime brokerage) and strong Wealth flows/NII stability .
• Q1 2025 also beat: $2.60 vs $2.21* and $17.74B vs $16.55B*; Q2 2024 beat: $1.82 vs $1.65* and $15.02B vs $14.31B* .
• Implications: Street likely raises Equities Markets run-rate assumptions, Wealth fee-based revenue trajectory, and IB revenue cadence into H2 given late-quarter equity underwriting rebound and healthy pipelines .

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

• Strong quality beat: EPS and revenue above consensus with healthy ROTCE (18.2%); momentum anchored by Equities Markets and Wealth flows—supports near-term resilience .
• Wealth engine accelerating: record fee-based flows ($42.8B) and NNA ($59.2B) with margin 28.3%; durable fee revenue growth and operating leverage remain key medium-term drivers .
• IB recovery forming: equity underwriting rebound late-quarter; advisory backlog constructive; sponsors/corporates engaged—watch deal windows and tariff cadence as catalysts into H2 .
• Capital return upshift: dividend raised to $1.00 and $20B buyback reauthorization—combined with CET1 ~15% and improving CCAR optics, this is a positive stock-supportive narrative .
• Rates/NII: Q3 NII expected near recent levels; downside limited by sweep behavior and lending growth; positioning should be resilient across modest easing scenarios .
• Regulatory reform tailwind: prospective SLR/CCAR reforms could free capacity for incremental capital deployment across IB/markets; monitor SCB finalization ahead of Oct 1 .
• Trading lens: near-term trades can lean into Equities/prime brokerage durability and H2 IB pipeline catalysts; medium-term thesis rests on integrated firm cross-sell, tech-enabled efficiency, and secular wealth/IM growth .

Additional Materials Reviewed

• Q2 2025 8-K Earnings Press Release and Financial Supplement: firm/segment financials, capital, KPIs .
• Q2 2025 Earnings Call Transcript: prepared remarks and Q&A (strategy, capital return, NII, IB pipelines, regulatory context) .
• Q1 2025 8-K and Earnings Call: prior quarter comparisons and guidance context .
• Capital return press release (July 1, 2025): dividend hike to $1.00 and $20B buyback reauthorization .
• SCB/CCAR updates (Aug 29, 2025): Board review of SCB adjustment, finalization expected before Oct 1 .