Morgan Stanley Q2 Revenue Hits $16.8 Billion

Morgan Stanley(NYSE:MS) reported fiscal 2025 second-quarter earnings on Wednesday, July 16, posting $16.8 billion in revenue (up 12% year over year), $2.13 in earnings per share, and an 18.2% return on return on tangible common equity (ROTCE). Wealth and Investment Management client assets reached $8.2 trillion, with net new assets of $59 billion, and fee-based flows reached a record $43 billion. The company increased its quarterly dividend to $1 per share.

Key insights highlight the durability of capital deployment, organic and inorganic growth strategies, and rapid scaling across its wealth, investment management, and capital markets franchises.

Morgan Stanley Sees Capital Deployment Capacity Expand Amid Regulatory Tailwinds

The firm ended the quarter with a 15% CET1 ratio -- over 200 basis points above its requirement -- reflecting a $54 billion sequential increase in total spot assets. Management anticipates additional regulatory reform, citing recent favorable changes to the Supplementary Leverage Ratio (SLR) proposal and strong Comprehensive Capital Analysis and Review (CCAR) stress test results, indicating an improving environment for capital allocation.

"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. ... We printed 15% CET1, we are at 13% with clearly indications that you see from the most recent that the numbers are going in our direction on the back of continued regulatory reform. So that kind of buffer, we should be thinking about this and taking steps, and we are as we speak."
— Ted Pick, Chairman and CEO

Ample surplus capital and heightened regulatory flexibility provide the firm with an immediate competitive edge to expand lending, invest in growth businesses, and enhance shareholder returns through dividends and buybacks, as discussed on the Q2 2025 earnings call.

There Is a Secular Growth Pipeline in Wealth and Multichannel Asset Gathering for Morgan Stanley

Pretax profits in Wealth Management reached a record $2.2 billion on a pretax margin of 28.3%, while fee-based advisory flows of $43 billion marked an all-time high (excluding acquisitions). Net new asset growth is increasingly being fueled by cross-channel integration -- specifically, adviser-led, Workplace, and self-directed flows.

"We used to say we had about $16 billion per year that we're originating from Workplace. This year, we're running ahead of those numbers. It just shows you the strength of all of the channels. ... And then the fee-based flows, which you didn't ask about, but I'll just touch on, is also -- are very, very strong, just underscoring how well the funnel is working."
— Sharon Yeshaya, Chief Financial Officer

Superior organic net asset growth, broad multi-channel client acquisition, and scaled platform operating leverage position Morgan Stanley to consistently drive recurring, high-margin earnings as global client relationships deepen.

Integrated Global Markets Franchise Drives Structural Operating Leverage

Equities revenues reached $3.7 billion -- with EMEA delivering a record quarter and Asia posting strong first-half growth -- while Fixed Income revenue surpassed $2 billion for multiple consecutive quarters, even in unpredictable market environments. Prime brokerage revenues reached all-time highs, with average client balances also reached all-time highs amid volatility-driven client repositioning.

"What is remarkable about this year or worthy of calling out, and Sharon made reference to it, is this quarter in Europe, we had a record quarter in equities. In the first half, we've had a quite extraordinary half in Asia, which is obviously Hong Kong and Tokyo lead. So it's not just about the electronification of the product and the span of the product palette, but it's also the ability to run the business globally. I'd also just touch on Fixed Income, not so many years ago, we were talking about trying to get to $1 billion a quarter. And now Fixed Income has quietly put up $2 billion a quarter through every imaginable kind of environment for a whole bunch of quarters."
— Ted Pick, Chairman and CEO

This sustained structural improvement in markets revenue generation -- across cash equities, derivatives, and fixed income -- verifies the firm’s durable competitive advantage and ability to convert ongoing investment in technology, talent, and geographic reach into outpaced top-tier operating returns

Looking Ahead

Management reaffirmed its target to exceed $10 trillion in client assets and expects net interest income to remain at recent levels in the next quarter, with projected tax rates around 24% in the second half of 2025. Incremental capital will be deployed across core organic growth priorities in Wealth, Investment Management, and Institutional businesses, with select inorganic “tuck-in” acquisitions evaluated against a stringent strategic bar. No specific forward financial guidance was provided beyond these milestones and prior quantitative targets.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.