Morgan Stanley Q2 net revenue increased by 12% year-on-year, with strong growth in wealth management and trading income, while investment banking remains under pressure | Earnings Report Insights

On July 16, Morgan Stanley announced its Q2 2025 financial report. The company exceeded market expectations across multiple key business lines, demonstrating the robust effectiveness of its "integrated platform" strategy. Notably, wealth management and equity trading became the dual engines of profit, offsetting the continued drag from the sluggish investment banking business.

Key Financial Data Highlights:

• Net Revenue: $16.79 billion, exceeding market expectations of $16.04 billion, a year-on-year increase of 12%.

• Earnings Per Share (EPS): $2.13, higher than the expected $1.89.

• Return on Tangible Common Equity (ROTCE): 18.2%, well above the market expectation of 16.7%, indicating strong earnings quality.

• Return on Equity (ROE): 13.9%, expected to be 12.7%.

Wealth Management Business Remains Strong

Morgan Stanley's wealth management business achieved revenue of $7.76 billion, a year-on-year increase of 14%, exceeding market expectations of $7.35 billion, with a pre-tax profit of $2.2 billion and a pre-tax profit margin of 28.3%.

• Net New Assets reached $59.2 billion, setting a new record, with Fee-Based Asset Inflows of $42.8 billion.

• Asset Management Revenue grew by 10.6% year-on-year to $4.41 billion, primarily benefiting from the increase in client asset scale.

• The total client assets managed by the company have reached $8.2 trillion, with fee-based assets amounting to $2.48 trillion.

The continuous expansion of this segment highlights Morgan Stanley's successful transformation towards a "high stickiness + stable income" model.

Equity Sales and Trading Business Significantly Exceeds Expectations

In the institutional securities business, Equity Sales and Trading Revenue was $3.72 billion, far exceeding market expectations of $3.53 billion, with a year-on-year increase of 23%, setting multiple sub-business line growth records.

• Prime Brokerage and derivatives trading demand saw significant increases, driving trading activity.

• The company noted that "comprehensive growth across different regions and business lines, with high client trading activity" was one of the highlights of the quarter.

In contrast, Fixed Income, Currency, and Commodities (FICC) Business revenue was $2.18 billion, slightly above market expectations of $2.11 billion, with a year-on-year increase of 9%.

Investment Banking Business Still Under Pressure, but Some Underwriting Highlights Are Clear

Overall revenue from the investment banking business was $1.54 billion, a year-on-year decrease of 5%. Among them:

• Advisory Revenue was $508 million, slightly below the expected $530 million.

• Equity Underwriting Revenue reached $500 million, significantly exceeding the expected $383 million, benefiting from the recovery of IPOs and convertible bond issuances.

• Fixed Income Underwriting Revenue was $532 million, slightly below the expected $541 million, primarily due to a decrease in high-yield bond issuances Overall, Morgan Stanley has demonstrated stronger resilience in underwriting compared to its competitors.

Cost and Capital Management

• Non-interest expenses were $11.97 billion, higher than the market expectation of $11.51 billion, mainly due to increased compensation and DCP (Deferred Compensation Plan) expenses.

• Provision for bad debts was $196 million, exceeding the expected $131 million, reflecting increased uncertainty in the macro environment.

• Effective tax rate was 22.7%, lower than the expected 23.7%.

• The company announced an increase in the quarterly dividend to $1.00 and initiated a share repurchase program of up to $20 billion.

Updating