Earnings Call Insights: Morgan Stanley (MS) Q3 2025
Management View
- CEO Ted Pick stated that “Morgan Stanley generated record top and bottom line performance with revenues of $18.2 billion and EPS of $2.80. Robust returns on tangible of 23.5% reflect the operating leverage of the integrated firm.” Pick emphasized the “capital markets flywheel is taking hold” and highlighted the firm’s focus on delivering “earnings and returns durability alongside continued dividend growth through periods of uncertainty.” He cited sequential EPS growth and underscored the firm’s “consistent execution” and progress toward the $10 trillion client asset milestone, with total client assets reaching $8.9 trillion.
- Pick noted, “Our equities business affirmed its #1 position with a standout quarter. A rebound in the Investment Banking environment reopened the door to strategic M&A and renewed financing activity.”
- CFO Sharon Yeshaya said, “The Firm delivered exceptional results in the third quarter, underscoring the power of our global integrated firm and the scale of $8.9 trillion in total client assets. Performance was very strong across the businesses and regions, driving record revenues [ DVA ] of $2.80 and an ROTCE of 23.5%.” Yeshaya highlighted investments in technology, including AI initiatives such as DevGen AI, Parable, and LeadIQ, which are “laying the foundation to drive productivity across the firm.”
Outlook
- Management indicated an expectation of “a modest sequential gain in NII” for the fourth quarter, with Yeshaya stating that “the rate environment, trajectory of loan growth and deposit mix will all come into play.”
- Pick reaffirmed the goal to surpass $10 trillion in total client assets and described the firm as “well positioned in each of our businesses and is demonstrating consistent execution.”
- Yeshaya mentioned, “We continue to expect our fourth quarter tax rate will be approximately 24%.”
Financial Results
- Morgan Stanley reported revenues of $18.2 billion and EPS of $2.80 for the third quarter.
- Return on tangible common equity (ROTCE) was 23.5%.
- Total client assets across Wealth and Investment Management increased by $1.3 trillion year-over-year to $8.9 trillion.
- Net new assets in Wealth Management were $81 billion with $42 billion in fee-based flows; reported margins were 30%.
- Institutional Securities revenues reached $8.5 billion, with Investment Banking revenues increasing to $2.1 billion. Advisory revenues were $684 million, equity underwriting revenues $652 million, and fixed income underwriting revenues $772 million.
- The firm bought back $1.1 billion of common stock in the quarter.
- Standardized CET1 ratio stands at 15.2%; total end-period deposits grew to $398 billion.
Q&A
- Daniel Fannon, Jefferies: Asked about the sustainability of trends and the Investment Banking backlog. Pick responded, “It’s happening across industry groups. It’s happening across regions…the pipeline looks very good across all 3 regions. So we are optimistic.”
- Ebrahim Poonawala, BofA: Questioned the sustainability of the 30% pretax margin. Pick replied, “We’re going to continue to put investment dollars into the system…whether that with continued operating leverage gets us to a number that is higher than 30% over time, let’s see how it goes.”
- Brennan Hawken, BMO: Inquired about the expanded Carta partnership. Yeshaya described it as a multipronged approach, noting, “We have seen conversions into our space from the public side already over the course of this year.”
- Glenn Schorr, Evercore: Asked about capital deployment and future growth. Pick stated, “The best uses of capital continue to be internal investment into the business and into the integrated firm…The organic opportunity is the one that clears the bar and checks the most boxes.”
- L. Erika Penala, UBS: Sought views on sustainability of the investment banking backlog. Yeshaya said, “We’re beginning to see it already. We saw it in the third quarter, and it continues to be a big part of our…pipeline for the forward.”
- Saul Martinez, HSBC: Challenged the durability of Institutional Securities profitability. Pick acknowledged, “If you have lower asset prices and deleveraging and credit spreads widen because there’s a recession concern…markets businesses generally are going to perform less well.”
Sentiment Analysis
- Analysts maintained a largely positive to neutral tone, seeking clarification on sustainability, growth, and margin durability. Questions probed the longevity of current performance trends and the impact of macroeconomic cycles.
- Management maintained a confident and slightly optimistic tone in prepared remarks, repeatedly highlighting “record” performance and execution, while in Q&A, responses remained measured and occasionally cautious, especially when discussing potential risks and the sustainability of results.
- Compared to the previous quarter, management’s tone was more assertive regarding execution, while analysts’ questions continued to focus on forward risks but with heightened attention to sustainability and competitive positioning.
Quarter-over-Quarter Comparison
- Third quarter results marked a step up in both revenue ($18.2 billion in Q3 vs. $16.8 billion in Q2) and EPS ($2.80 in Q3 vs. $2.13 in Q2), with ROTCE climbing to 23.5% from 18.2%.
- Wealth Management margins improved to 30% from 28.3% in prior quarter.
- The scale of net new assets in Wealth Management increased ($81 billion in Q3 vs. $59 billion in Q2).
- Institutional Securities revenues rose to $8.5 billion from $7.6 billion, with particular strength in Investment Banking and equity underwriting.
- Previous quarter commentary was more cautious regarding regulatory reform and market volatility, while this quarter reflected greater confidence in execution and capital strength.
- Analysts continued to focus on margin sustainability, capital deployment, and inorganic opportunities, but with increased emphasis on the durability of results.
Risks and Concerns
- Management acknowledged macroeconomic and geopolitical uncertainty but emphasized the firm’s “earnings durability and capital strength.”
- Pick noted, “Periods of economic and geopolitical uncertainty were to be expected as we transition…to a period we now could call the continuation of history.”
- Analysts raised questions about the sustainability of high profitability in Institutional Securities and the firm’s ability to maintain margins amid changing market conditions.
Final Takeaway
Morgan Stanley’s management highlighted record results and strong execution across businesses, reinforced the integrated firm’s resilience, and maintained a clear commitment to internal investment and operating leverage. With Wealth and Investment Management client assets nearing $9 trillion and a focus on surpassing $10 trillion, management is optimistic about future growth but remains attentive to market and regulatory uncertainties. The third quarter’s outstanding financial metrics and the optimism around capital markets momentum position the firm for continued progress toward its long-term strategic goals.