Form 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Morgan Stanley’s quarterly report for the period ended March 31, 2025, shows a strong financial performance. The company reported net income of $2.3 billion, a 12% increase from the same period last year. Revenue increased by 10% to $13.4 billion, driven by growth in its Institutional Securities and Wealth Management businesses. The company’s assets under management (AUM) reached $1.4 trillion, a 5% increase from the previous quarter. Morgan Stanley’s capital ratios remain strong, with a Tier 1 common equity ratio of 11.4%. The company also repurchased $1.1 billion of its common stock during the quarter. Overall, the report highlights Morgan Stanley’s continued growth and profitability, driven by its diversified business model and strong market performance.
Executive Summary
Morgan Stanley, a leading global financial services firm, has reported strong financial results for the first quarter of 2025. The company delivered robust performance across its business segments, with net revenues of $17.7 billion and net income of $4.3 billion, representing increases of 17% and 26% respectively compared to the same period in the prior year.
The firm’s return on equity (ROE) was 17.4% and return on tangible common equity (ROTCE) was 23.0%, reflecting the company’s ability to generate solid returns for its shareholders. Morgan Stanley’s expense efficiency ratio, which measures non-interest expenses as a percentage of net revenues, improved to 68% from 71% in the prior year quarter.
The Institutional Securities business segment was a standout performer, with net revenues increasing by 28% driven by strong results in Equity and gains on the sale of corporate loans. Wealth Management also delivered a solid performance, with a pre-tax margin of 26.6% and net revenues growing by 6%. Investment Management reported a 16% increase in net revenues, primarily due to higher asset management fees and performance-based income.
The company continued to maintain a strong capital position, with a Standardized Common Equity Tier 1 capital ratio of 15.3% as of March 31, 2025. Morgan Stanley also accreted $1.9 billion of Common Equity Tier 1 capital during the quarter.
Overview of Financial Results
Morgan Stanley reported net revenues of $17.7 billion in the first quarter of 2025, a 17% increase compared to the same period in the prior year. Net income applicable to the company was $4.3 billion, up 26% from the prior year quarter. Diluted earnings per common share increased by 29% to $2.60.
The firm’s expense efficiency ratio, which measures non-interest expenses as a percentage of net revenues, improved to 68% from 71% in the prior year quarter. This was primarily due to higher revenues, partially offset by increased compensation and benefits expenses, including $144 million in severance costs related to a reduction in force across the business segments.
Morgan Stanley’s provision for credit losses on loans and lending commitments was $135 million in the current quarter, compared to a net release of $6 million in the prior year quarter. The increase was primarily related to portfolio growth, provisions for certain specific loans, and deterioration in the macroeconomic outlook.
Business Segment Results
The Institutional Securities business segment reported net revenues of $8.98 billion, a 28% increase from the prior year quarter. This was driven by higher results in Equity and gains on the sale of corporate loans held-for-sale, compared to mark-to-market losses in the prior year quarter.
Wealth Management net revenues grew by 6% to $7.33 billion, primarily reflecting higher asset management revenues, partially offset by lower transactional revenues. The business segment delivered a pre-tax margin of 26.6%.
Investment Management net revenues increased by 16% to $1.60 billion, reflecting higher performance-based income and other revenues, as well as higher asset management and related fees.
From a geographic perspective, the company’s net revenues in the Americas increased by 13%, while EMEA and Asia saw increases of 25% and 35% respectively, driven by stronger performance in the Institutional Securities and Investment Management business segments.
Liquidity and Capital Resources
Morgan Stanley maintained a strong liquidity position, with average daily Liquidity Resources of $351.7 billion during the first quarter of 2025. The company’s Liquidity Coverage Ratio (LCR) was 130%, well above the regulatory minimum of 100%.
The firm’s Standardized Common Equity Tier 1 capital ratio was 15.3% as of March 31, 2025, compared to 15.9% at the end of 2024. The decrease was primarily due to an increase in risk-weighted assets, partially offset by the accretion of $1.9 billion of Common Equity Tier 1 capital during the quarter.
Morgan Stanley is in compliance with all regulatory capital requirements, including the Total Loss-Absorbing Capacity (TLAC) and long-term debt standards. The company’s TLAC as a percentage of risk-weighted assets was 53.5% as of March 31, 2025, well above the regulatory minimum of 21.5%.
Strengths and Weaknesses
Strengths:
- Diversified business model with strong performance across Institutional Securities, Wealth Management, and Investment Management segments
- Robust capital and liquidity positions, exceeding regulatory requirements
- Improving expense efficiency, with the expense efficiency ratio declining to 68%
- Consistent ability to generate high returns, with ROE of 17.4% and ROTCE of 23.0%
Weaknesses:
- Increased provision for credit losses, primarily due to portfolio growth and deterioration in the macroeconomic outlook
- Severance costs of $144 million related to a reduction in force, which impacted non-interest expenses
- Potential exposure to global trade policy risks, which could adversely impact certain credit portfolios
Outlook and Future Considerations
The economic environment, client and investor confidence, and overall market sentiment deteriorated in 2025, as recent developments around global trade and government policies resulted in increased economic uncertainty and market volatility. Geopolitical risks, inflation, and the timing and pace of central bank actions related to interest rates present ongoing risks to the economic environment and growth.
These factors have impacted, and could continue to impact, capital markets and Morgan Stanley’s businesses. The company is closely monitoring the situation and has taken steps to manage its risk exposure, such as carefully monitoring its credit portfolios for potential trade policy effects.
Despite the challenging economic conditions, Morgan Stanley remains well-positioned to navigate the current environment. The firm’s diversified business model, strong capital and liquidity positions, and focus on expense management should enable it to continue delivering solid financial performance.
Looking ahead, the company has set a goal of achieving a return on tangible common equity (ROTCE) of 20%. This forward-looking target is based on the assumption of a normal market environment, and may be affected by various factors, including the pace and magnitude of changes in the macroeconomic landscape.
Overall, Morgan Stanley’s first-quarter 2025 results demonstrate the company’s ability to generate consistent, strong financial performance even in the face of economic and market uncertainties. The firm’s focus on risk management, capital discipline, and operational efficiency should serve it well as it navigates the evolving landscape and pursues its strategic objectives.
