Morgan Stanley Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Overall Performance: 2025 had $9.3 trillion in total client assets, $10.21 earnings per share, and a 21.6% return on tangible capital (ROTCE). Full-year revenues were $70.6 billion, with fourth quarter revenues of $17.9 billion. The efficiency ratio improved to 68.4%.
• Business Segments: Wealth management continued to see strong net new assets and fee-based flows. Institutional securities gained 100 basis points of wallet share. Investment management scaled AUM to $1.9 trillion.
• Strategic Initiatives: Invested in technology, global footprint, and strategic acquisitions. Leveraged AI throughout the enterprise. Focused on the value of advice and client engagement. Had 25% of revenues from outside the US, with EMEA and Asia showing strong revenue growth.
• Capital and Dividends: CET1 ratio was 15% with over 300 basis points of excess capital. Quarterly dividend raised to $1 per share, with plans for stock buybacks and opportunistic M&A.

Segment Performance

• Wealth Management: In 2025, wealth management had revenues of $32 billion with a 29% margin. It saw net new assets of over $350 billion in 2025, and over $1.6 trillion plus over the last five years. In the fourth quarter of 2025, revenues were $8.4 billion, with a margin of 31.4% (DCP negatively impacted by 95 basis points). Asset management revenues were a record $5 billion, transactional revenues were $1.1 billion, net new assets for the quarter were $122 billion, bank lending balances grew to $181 billion, total period deposits were $408 billion, and net interest income was $2.1 billion.
• Institutional Securities: 2025 full-year revenues were $33.1 billion, including $7.9 billion in the fourth quarter. Investment banking revenues for the full year were $7.6 billion, with fourth quarter revenues of $2.4 billion. Equity revenues for the full year were $15.6 billion, with $3.7 billion in the fourth quarter. Fixed income revenues for the full year were $8.7 billion, with $1.8 billion in the fourth quarter.
• Investment Management: In 2025, total revenues were $6.5 billion, and AUM scaled to $1.9 trillion. Full-year long-term net inflows were $34 billion, with $2 billion in the fourth quarter.

Guidance

• Expect to continue executing with tailwinds and headwinds, aiming for compound earnings through the cycle and achieving higher lows in challenging environments. Revisiting targets later in the year.
• For 2026, expected NII to remain roughly flat quarter over quarter in the first quarter but trend higher later. Investment banking pipelines are healthy, and the reopening of the IPO market creates opportunities.

Risks

• Geopolitical uncertainties impacting markets.
• Market volatility affecting asset prices.
• Regulatory changes potentially impacting capital requirements.
• Challenges in integrating acquisitions effectively.

Q: Good morning. So the results are pretty great across the board, and I think I appreciate your, your comments about environment, risks A: Well, think that's the important question for the day. We had a robust conversation about it, but in the end, the decision was really pretty easy. I think the view is that the shareholders ultimately want to see an enterprise that can operate at high levels with the kind of ballast that you began to see over the lows in the last decade. And then on the forward, we can achieve effectively higher lows.

Q: Good morning, Dan. So I guess just to follow-up on that given the success of the wealth management business. Can you talk about the drivers of the margin from here? Is it just scaling and growth of the business, or are the things underneath from a cost or efficiency that we should think about or mix of business that can drive those margins higher.

A: Thank you so much for the question. I think it's both. We have consistently added fee-based flows. That is demonstration that the funnel is working. So from the revenue line items, the drivers of continued expanded margins are twofold. One is building out the fee-based revenues and the fee-based assets, and that is happening as we do introduce new clients to the power of the advice-based model. But there are also clients who just want self-directed activity, and we have been investing in that business in the ETRADE franchise, in ETRADE Pro, and you see that our transactional revenues are also increasing. So that's an investment story in technology. And the second piece that you mentioned is efficiency. We are also using technology to help us from an efficiency perspective both on the cost and the revenue side. I'd note to you that some of the AI that we've been doing is actually also on the revenue side. So LeadIQ, for example, which is helping us introduce our advisers to our clients who are interested in the advice-based model. That's happening using AI. So there's technology that can be used both on the revenue side and on the expense side. That should help us drive the margin on both the top and the bottom line.