Morgan Stanley Beats Q2 Earnings on Robust Trading, IB Remains Subdued

Morgan Stanley’s MS second-quarter 2025 earnings of $2.13 per share handily outpaced the Zacks Consensus Estimate of $1.93. Also, the bottom line rose 17% from the prior-year quarter.

Unlike its Wall Street peers, Morgan Stanley’s investment banking (IB) business performance was subdued. Advisory fees declined 14% year over year as completed M&A transactions dropped. Further, lower non-investment grade issuances hurt the company’s fixed income underwriting fees, which decreased 21%. On the other hand, equity underwriting income jumped 42%. So, total IB fees (in the Institutional Securities division) fell 5% to $1.54 billion. We had projected it to be $1.55 billion.

Meanwhile, as expected, the company posted a solid trading performance. Equity trading revenues increased 23% year over year to $3.72 billion and fixed-income trading income was up 9% to $2.18 billion. Our projections for equity and fixed-income trading revenues were $3.03 billion and $2.12 billion, respectively.

Further, the performance of wealth management and investment management businesses was impressive. The company’s NII increased, given higher lending activities. The increase in total non-interest expenses and provisions posed the undermining factors.

Net income applicable to common shareholders was $3.39 billion, up 15% from the year-ago quarter. Our estimate for the metric was $3.22 billion.

Morgan Stanley’s Revenues Jump, Expenses Rise

Quarterly net revenues were $16.79 billion, up 12% from the prior-year quarter. The top line handily beat the Zacks Consensus Estimate of $15.92 billion.

NII was $2.34 billion, up 14%. We had projected NII of $2.27 billion.

Total non-interest revenues of $14.45 billion rose 12%. Our estimate for the metric was $13.63 billion.

Total non-interest expenses were $11.97 billion, up 10%. Our estimate for the metric was $11.59 billion.

Provision for credit losses was $196 million, up substantially from $76 million in the prior-year quarter. We had projected the metric to be $59.2 million.

Morgan Stanley’s Segment Performance

Institutional Securities: Pre-tax income was $2.11 billion, rising 3% from the prior-year quarter. Our estimate for the same was $2.21 billion.

Net revenues were $7.64 billion, up 9% year over year. The upside resulted from increased equity underwriting income and trading revenues, partially offset by lower advisory revenues and fixed income underwriting revenues. We had projected revenues of $7.48 billion.

Wealth Management: Pre-tax income totaled $2.2 billion, jumping 21% year over year. Our estimate for the metric was $1.83 billion.

Net revenues were $7.76 billion, rising 14%, driven by higher asset management revenues, transactional revenues and NII. We had projected revenues of $7.11 billion.

Total client assets were $6.49 trillion as of June 30, 2025, up 14% year over year. We had projected the metric to be $6.06 trillion.

Investment Management: Pre-tax income was $323 million, climbing 45% from the year-ago quarter. Our estimate for the same was $217.2 million.

Net revenues were $1.55 billion, up 12%. The improvement was attributable to a rise in asset management and related fees, and performance-based income and other revenues. We had projected revenues of $1.47 billion.

As of June 30, 2025, total assets under management or supervision were $1.71 trillion, up 13% year over year. Our estimate for the metric was $1.67 trillion.

Morgan Stanley’s Capital Position Solid

As of June 30, 2025, book value per share was $61.59, up from $56.80 in the corresponding period of 2024. The tangible book value per share was $47.25, up from $42.30 as of June 30, 2024.

Morgan Stanley’s Tier 1 capital ratio (advanced approach) was 17.6% compared with 17.3% in the year-ago quarter. The common equity Tier 1 capital ratio was 15% compared with 15.2% a year ago.

Update on Morgan Stanley’s Capital Plan

In the reported quarter, Morgan Stanley repurchased 8 million shares for $1 billion.

Additionally, as the company cleared the 2025 stress test, it reauthorized a multi-year share repurchase program of up to $20 billion.

Additionally, Morgan Stanley announced a quarterly dividend of $1.00 per share, representing a hike of 8% from the prior payout. The dividend will be paid out on Aug. 15 to shareholders on record as of July 31.

Our Viewpoint on Morgan Stanley

The rebound of the IB business and a solid deal-making pipeline are expected to support Morgan Stanley’s financials going forward. Efforts to become less dependent on capital markets-driven revenues, inorganic expansion/strategic alliance and relatively high rates will support top-line growth. However, elevated expenses due to expansion efforts and volatile trading revenues are concerns.
 

Morgan Stanley Price, Consensus and EPS Surprise

Morgan Stanley price-consensus-eps-surprise-chart | Morgan Stanley Quote

Currently, Morgan Stanley carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Morgan Stanley’s Peers

Jefferies Financial Group’s JEF second-quarter fiscal 2025 (ended May 31) adjusted earnings of 43 cents per share matched the Zacks Consensus Estimate. The bottom line compared unfavorably with the prior-year quarter’s earnings of 67 cents per share. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

Results were aided by strong performance in equity trading. However, weak performances in underwriting and asset management businesses, and higher expenses were the undermining factors for JEF.

JPMorgan’s JPM second-quarter 2025 adjusted earnings were $4.96 per share. The bottom line handily surpassed the Zacks Consensus Estimate of $4.51.

Better-than-expected performance of capital markets businesses, higher NII, solid growth in credit card and wholesale loans and lower provisions supported JPM’s results. Higher adjusted expenses were the spoilsport.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research