Morgan Stanley outlines $10T client asset target and signals ongoing capital deployment amid regulatory shifts

Earnings Call Insights: Morgan Stanley (MS) Q2 2025

Management View

• CEO Edward N. Pick emphasized a strong performance despite a volatile start to the quarter, highlighting “$16.8 billion in revenue, $2.13 in EPS and an 18.2% return on tangible” for Q2. Pick underscored the benefit of “6 sequential quarters of durable earnings” and noted, “Total client assets across Wealth and Investment Management climbed to over $8.2 trillion, reflecting our scale and gaining ground toward our target to exceed $10 trillion.”
• Pick outlined a focus on capital deployment, citing an “expectation of a more constructive regulatory backdrop,” and stated, “We now have a $1 per share dividend. Incremental capital deployment will range from supporting clients, growing our businesses, opportunistically buying back stock and evaluating inorganic opportunities where there is clear strategic alignment.”
• Sharon Yeshaya, CFO, reported, “In the second quarter, the Firm produced revenues of $16.8 billion. Our EPS was $2.13 and our ROTCE was 18.2%.” Yeshaya highlighted efficiency initiatives: “The Firm’s year-to-date efficiency ratio was 70%. Efficiency gains remain a product of continued prioritization of our controllable spend and savings from prior space exits, self-funding investments and driving increased productivity by leveraging technology to support the Firm’s strategy.”

Outlook

• Management communicated ongoing momentum into the third quarter, with Pick stating, “Looking ahead, we remain constructive on the market environment. Our strategy to raise, manage and allocate capital for clients across the wealth and institutional universe is working.”
• Yeshaya provided forward guidance: “As we look ahead to the third quarter, we would expect NII to remain around recent levels, subject to changes in the policy rate.”

Financial Results

• Revenues for Q2 were $16.8 billion, with EPS at $2.13 and return on tangible equity at 18.2%. The efficiency ratio year-to-date was 70%.
• Institutional Securities revenues reached $7.6 billion, with equities markets generating $3.7 billion and fixed income revenues of $2.2 billion. Investment banking revenues were $1.5 billion, and equity underwriting delivered $500 million.
• Wealth Management revenues totaled $7.8 billion, with pretax profit at $2.2 billion and a pretax margin of 28.3%. Fee-based flows were $43 billion, and net new assets were $59 billion, despite a $22 billion headwind from tax outflows.
• Investment Management revenues reached $1.6 billion, with total AUM at a record $1.7 trillion and positive long-term net flows of $11 billion. Asset management and related fees were $1.4 billion.
• Total spot assets rose to $1.4 trillion, and the standardized CET1 ratio stood at 15%. The quarterly dividend was increased to $1 per share.

Q&A

• Ebrahim Huseini Poonawala, BofA Securities: Asked about Morgan Stanley’s ability to generate higher returns on capital in light of regulatory changes and the potential for increased profitability. Pick responded, “We are, as we speak, deploying additional capital into the core businesses. So the organic development is happening and will continue to happen where we think there’s operating leverage with smart risk architected deployment around clients.”
• Daniel Thomas Fannon, Jefferies: Inquired about acquisition strategy and financial factors influencing potential transactions. Pick stated, “It has to fit squarely within the strategy to raise, manage and allocate capital for clients. We have a record of integration. But we are not looking to make acquisitions just for the sake of it.”
• Devin Patrick Ryan, Citizens JMP: Questioned stablecoin and tokenization opportunities. Yeshaya answered, “We’re actively discussing it. We’re looking both at the landscape and the uses and the potential uses for our own client base. But it really is a little early to tell.”
• Glenn Paul Schorr, Evercore: Asked about capital deployment in asset management. Pick replied, “The opportunities across Investment Management…given the fragmentation of the industry and given how some folks are doing a lot better than others, there are many, many acquisition opportunities in the asset management space, as you are well aware. We are being very careful about that.”
• Michael Lawrence Mayo, Wells Fargo: Sought clarity on lending trends through the capital markets division. Pick detailed, “I think we sort of sense that the 15-year dam is breaking and that reform is in the offing. We’ve seen indications of that in SLR, as you know, and recent strong results from the group in this recent CCAR exam.”
• Erika Najarian, UBS: Queried priorities for deposit growth and bank strategy. Yeshaya stated, “The bank is clearly a priority for us. We put it into the strategic objectives purposefully to really talk about the fact that we see more potential growth as we think about eligibility.”

Sentiment Analysis

• Analysts asked probing questions on capital deployment, inorganic growth, and regulatory impacts, with a tone that was generally neutral to slightly positive, reflecting interest in the firm’s ability to sustain and build on recent performance.
• Management maintained a confident and constructive tone in both prepared remarks and Q&A, with Pick emphasizing, “We’re giving this quite a bit of thought,” and consistently highlighting strategic discipline, durable earnings, and flexibility amid evolving regulation.
• Compared to the previous quarter, both analysts and management showed increased focus on capital deployment and regulatory reform as market conditions stabilized.

Quarter-over-Quarter Comparison

• Previous quarter revenues and EPS were higher at $17.7 billion and $2.60, compared to $16.8 billion and $2.13 in the current quarter; return on tangible equity also declined from 23% to 18.2%.
• Wealth Management net new assets and fee-based flows decreased from $94 billion and $30 billion to $59 billion and $43 billion, respectively, while total client assets expanded from $7.7 trillion to $8.2 trillion.
• Management tone shifted to a more forward-looking stance, with increased discussion of regulatory reform and explicit capital deployment strategies. Analysts’ questions this quarter reflected heightened interest in inorganic growth and regulatory clarity, whereas the previous quarter included more discussion on market volatility and trading resilience.

Risks and Concerns

• Management cited ongoing economic and geopolitical uncertainty, noting, “Amidst continuing economic and geopolitical uncertainty, we are intensely focused on continuing to deliver outstanding durable results for clients and returns for shareholders.”
• Yeshaya highlighted, “ISG lending provisions were $168 million, driven by portfolio growth and a moderately weaker macroeconomic outlook. Net charge-offs were $19 million, primarily related to several commercial real estate loans.”
• Analysts raised concerns regarding the impact of regulatory changes, the pace of market recovery, and the opportunities in digital assets, with management acknowledging these as areas under active review.

Final Takeaway

Morgan Stanley’s leadership emphasized consistent execution across global businesses, a growing wealth platform now surpassing $8.2 trillion in assets, and a disciplined approach to capital deployment, including both organic and selective inorganic opportunities. Management signaled ongoing momentum and flexibility backed by a strong capital position, a rising dividend, and a strategic focus on exceeding the $10 trillion client asset target amid evolving regulatory and market conditions.

Read the full Earnings Call Transcript