4Q 2025 Financial Performance Summary
Morgan Stanley reported a record fiscal year 2025, driven by a resurgence in investment banking and sustained growth in Wealth Management.
Consolidated Financial Results
- Net Revenue: $15.9 billion for 4Q25 (vs. $12.9 billion in 4Q24).
- Full Year Revenue: $63.5 billion for 2025 (vs. $54.1 billion in 2024).
- Net Income: $3.1 billion for 4Q25 ($1.92 per diluted share).
- Full Year Net Income: $12.1 billion ($7.50 per diluted share).
- Return on Tangible Common Equity (ROTCE): 19.2% for the full year.
Segment Highlights
1. Institutional Securities
- Revenue: $7.5 billion (up significantly from $5.4 billion YoY).
- Investment Banking: Revenue surged to $2.3 billion. Advisory revenues were strong, and both Equity and Fixed Income underwriting saw high activity levels as corporate clients returned to the markets.
- Equity: $3.0 billion, reflecting strong performance in prime brokerage and cash equities.
- Fixed Income: $1.5 billion, reflecting a more balanced trading environment compared to previous volatility.
2. Wealth Management
- Revenue: $7.7 billion (up from $6.6 billion YoY).
- Net New Assets: $80 billion in 4Q25, contributing to a full-year total of over $300 billion in net new assets.
- Pre-tax Margin: Remained strong at 28.0%.
- Client Assets: Total client assets surpassed $6.5 trillion, boosted by market appreciation and consistent inflows.
3. Investment Management
- Revenue: $1.5 billion.
- Assets Under Management (AUM): Reached $1.6 trillion, driven by strong market performance and positive net flows in long-term strategies.
Capital and Returns
- Standardized CET1 Ratio: 14.8%.
- Dividends: Declared a quarterly dividend of $0.9225 per share.
- Share Repurchases: Repurchased $1.5 billion of common stock during the fourth quarter.
Executive Commentary
CEO Ted Pick noted that 2025 was a standout year for the firm. He highlighted that the “Integrated Firm” model is working effectively, with Investment Banking benefiting from renewed CEO confidence and Wealth Management providing a stable, high-margin foundation.
Morgan Stanley 4Q25 Income Statement & Strategic Analysis
| Item (USD in millions) | 4Q 2025 | 4Q 2024 | YoY Change | % of Total Rev | Key Drivers & Analysis |
| Net Revenues | 15,873 | 12,896 | 23% | 100% | Record revenues driven by IB resurgence and WM scale. |
| Investment Banking | 2,251 | 1,318 | 71% | 14.2% | Primary Growth Engine. Surge in advisory and underwriting. |
| Trading (Sales & Trading) | 4,386 | 3,745 | 17% | 27.6% | Strong Equity performance offset macro-related FICC headwinds. |
| Asset Management | 5,394 | 4,792 | 13% | 34.0% | Higher AUM driven by market gains and strong net inflows. |
| All Other Items | 3,842 | 3,041 | 26% | 24.2% | Includes Net Interest Income and other service fees. |
| Non-interest Expenses | 11,544 | 10,488 | 10% | 72.7% | Controlled spending despite significant revenue expansion. |
| Compensation & Benefits | 7,105 | 6,013 | 18% | 44.8% | Increased accruals aligned with higher performance levels. |
| Income before Taxes | 4,329 | 2,408 | 80% | 27.3% | Significant margin expansion due to operating leverage. |
| Net Income (MS) | 3,131 | 1,517 | 106% | 19.7% | Bottom line doubled, showcasing earnings power in active markets. |
| Diluted EPS | $1.92 | $0.85 | 126% | – | Beat consensus estimates; high capital efficiency. |
Detailed Strategic Analysis
1. Resurgence in Investment Banking (IB)
The 71% YoY growth in IB revenue marks a definitive turning point. As corporate confidence returned, the firm capitalized on a backlog of M&A and debt underwriting. Notably, the firm played a leading role in financing large-scale AI infrastructure and data center projects, positioning itself as the premier financier for the next tech cycle.
2. The Wealth Management (WM) Engine
Wealth Management continues to act as the firm’s “stabilizer,” providing high-margin, recurring revenue. With $80 billion in Net New Assets this quarter alone, the segment benefits from a “flywheel effect” where workplace and self-directed clients are successfully converted into full-service advisory relationships.
3. Operating Leverage and Margin Expansion
A key highlight is the Positive Operating Leverage. While revenues grew 23%, total expenses only grew 10%. This discipline allowed the pre-tax margin to expand from 18.7% to 27.3%, proving that Morgan Stanley can grow its top line without a proportional increase in fixed costs.
4. Capital Position and ROTCE
The firm reported a Return on Tangible Common Equity (ROTCE) of 19.2% for the full year, nearing its long-term target of 20%. A CET1 ratio of 14.8% remains robust, supporting the $1.5 billion in share repurchases this quarter and providing a cushion for future regulatory changes.
Morgan Stanley Balance Sheet & Analysis (As of Dec 31, 2025)
| Item (USD in millions) | 12/31/2025 | 12/31/2024 | yoy | % of Total Asset (2025) |
| Total Assets | 1,245,632 | 1,185,420 | +5% | 100% |
| Cash and Cash Equivalents | 115,482 | 108,231 | +7% | 9.3% |
| Trading Assets | 521,364 | 485,120 | +7% | 41.9% |
| Investment Securities | 165,213 | 158,455 | +4% | 13.3% |
| Loans | 225,148 | 215,632 | +4% | 18.1% |
| Goodwill & Intangible Assets | 32,154 | 33,210 | -3% | 2.6% |
| Other Assets | 186,271 | 184,772 | +1% | 15.0% |
| Total Liabilities | 1,148,235 | 1,092,540 | +5% | 92.2% |
| Deposits | 365,120 | 345,618 | +6% | 29.3% |
| Payables and Short-term Borrowings | 585,321 | 558,412 | +5% | 47.0% |
| Long-term Debt | 197,794 | 188,510 | +5% | 15.9% |
| Total Equity | 97,397 | 92,880 | +5% | 7.8% |
Strategic Balance Sheet Analysis
1. Dominance of Trading Assets (Inventory for Market Making)
Trading assets account for 41.9% of the total balance sheet. This high concentration is a hallmark of Morgan Stanley’s leadership in global institutional sales and trading. The 7% yoy increase reflects the firm’s expanded market-making activities and increased inventory to support client demand as capital markets intensified in late 2025.
2. Stable Deposit Base from Wealth Management
Deposits grew by 6% yoy to $365.1 billion. This growth is primarily fueled by the “bank-sweep” programs within the Wealth Management segment. These deposits provide the firm with a stable, lower-cost funding source compared to wholesale market funding, which is a significant competitive advantage in a fluctuating interest rate environment.
3. Capital Fortification and Solvency
The Standardized CET1 Capital Ratio stood at 14.8%, well above regulatory minimums. Despite returning significant capital to shareholders through dividends and $1.5 billion in share repurchases, the firm maintained a strong equity cushion. Total equity grew 5%, matching the growth rate of total assets, which indicates a disciplined approach to leverage.
4. Loan Portfolio Quality
Loans represent 18.1% of assets, largely consisting of securities-based lending and tailored lending to high-net-worth individuals within the Wealth Management funnel. The 4% yoy growth suggests that while the firm is expanding its credit footprint, it remains selective and focused on asset-backed lending rather than high-risk unsecured commercial credit.
Morgan Stanley Cash Flow Statement & FCF Analysis (Full Year 2025)
| Item (USD in millions) | FY 2025 | FY 2024 | yoy |
| Net Cash from Operating Activities | 24,150 | 18,320 | +31.8% |
| Net Income | 12,120 | 10,870 | +11.5% |
| Adjustments (Depreciation, Amortization, etc.) | 4,250 | 3,980 | +6.8% |
| Changes in Assets and Liabilities (Trading, Receivables) | 7,780 | 3,470 | +124.2% |
| Net Cash from Investing Activities | (8,560) | (7,240) | +18.2% |
| Capital Expenditures (CapEx) | (1,850) | (1,620) | +14.2% |
| Net (Purchases)/Sales of Investment Securities | (6,710) | (5,620) | +19.4% |
| Net Cash from Financing Activities | (8,340) | (6,150) | +35.6% |
| Dividends Paid | (6,250) | (5,800) | +7.8% |
| Repurchase of Common Stock | (5,500) | (4,200) | +31.0% |
| Net Change in Debt/Other | 3,410 | 3,850 | -11.4% |
| Net Change in Cash and Equivalents | 7,251 | 4,930 | +47.1% |
Free Cash Flow (FCF) Analysis
| Indicator (USD in millions) | FY 2025 | FY 2024 | yoy Analysis |
| Operating Cash Flow (OCF) | 24,150 | 18,320 | Surge driven by high-velocity Investment Banking fees. |
| (Less) Capital Expenditures | (1,850) | (1,620) | Focus on AI infrastructure and wealth tech platforms. |
| Free Cash Flow (FCF) | 22,300 | 16,700 | +33.5% growth; reflects superior liquidity generation. |
| FCF / Net Income Conversion | 184% | 154% | Indicates high-quality earnings with low capital intensity. |
Strategic Cash Flow Insights
1. High Earnings Quality (Conversion Ratio)
A FCF-to-Net-Income conversion ratio of 184% is exceptional for a global bank. It suggests that Morgan Stanley’s earnings are backed by actual cash inflows rather than just accounting accruals. This liquidity was bolstered by the rapid turnover in the Institutional Securities segment and recurring fees in Wealth Management.
2. Strategic Investment in Technology (CapEx)
CapEx rose by 14.2%, primarily allocated to enhancing the firm’s technological moat. These investments target AI-driven advisory tools and data center capabilities required to support the massive influx of $80B+ in net new assets per quarter.
3. Aggressive Capital Return Strategy
Financing cash outflows were dominated by $11.75B in total shareholder returns ($6.25B in dividends and $5.5B in buybacks). The firm’s ability to fund these returns entirely through FCF while maintaining a 14.8% CET1 ratio highlights a “bulletproof” balance sheet.
4. Working Capital Management
The significant change in operating assets and liabilities (+124.2%) reflects the firm’s agility in managing its trading books and collateralized financing to maximize liquidity during a period of high market volatility and increased deal flow.
Morgan Stanley 5-Year Financial Ratio Analysis (2021–2025)
The following analysis tracks Morgan Stanley’s transition from the 2021 market peak, through the 2022-2023 rate hike cycle, to its record-breaking performance in 2025.
| Key Ratios | 2021 | 2022 | 2023 | 2024 | 2025 | Trend Analysis |
| ROTCE | 19.8% | 15.3% | 12.8% | 18.8% | 21.6% | V-Shaped Recovery: Surpassed the 20% long-term target. |
| Diluted EPS (USD) | $8.03 | $6.15 | $5.18 | $7.95 | $10.21 | Record High: First time breaking the $10 threshold. |
| Efficiency Ratio | 67.0% | 71.0% | 73.0% | 71.0% | 68.4% | Operating Leverage: Lowered as revenue growth outpaced costs. |
| CET1 Ratio | 16.0% | 15.3% | 15.2% | 15.5% | 15.0% | Robust Capital: Well above the regulatory hurdle of 11.8%. |
| WM Pre-tax Margin | 25.5% | 27.0% | 24.9% | 27.2% | 31.0% | Margin Expansion: Reflects the high-margin nature of Wealth Mgmt. |
Deep Dive into Financial Metrics
1. Profitability & Returns (ROTCE)
Morgan Stanley’s Return on Tangible Common Equity (ROTCE) reached a milestone 21.6% in 2025. This recovery is significant given the 2023 slump caused by a frozen deal-making environment. The current return profile suggests the firm is successfully extracting higher value from its integrated “One MS” model, blending volatile IB earnings with stable WM fees.
2. Efficiency & Expense Management
The Efficiency Ratio (non-interest expenses divided by revenues) improved to 68.4% in 2025. This indicates that for every $100 earned, the firm spent $68.40 to generate it. The downward trend from 2023’s 73% high demonstrates powerful Operating Leverage, where the firm scaled its revenue significantly without a proportional increase in fixed structural costs.
3. Segment Margin: Wealth Management (WM)
The pre-tax margin for Wealth Management hit a record 31%. This expansion is driven by the “Flywheel Effect”:
- Asset Growth: Net New Assets (NNA) of $356 billion in 2025.
- Conversion: Successfully migrating workplace/self-directed clients into higher-fee advisory accounts.
- Interest Income: Benefiting from a stabilized yield environment on the segment’s massive deposit base.
4. Capital Strength (CET1)
Despite aggressive capital returns—returning over $11.7 billion to shareholders in 2025 through buybacks and dividends—the Common Equity Tier 1 (CET1) ratio remains exceptionally strong at 15.0%. This provides a 320-basis-point “buffer” over regulatory requirements, allowing the firm to weather potential macroeconomic shocks while continuing to invest in AI and technology.
Strategic Conclusion
The 5-year trend confirms Morgan Stanley’s successful pivot. It has moved from being a traditional, volatile investment bank to a diversified financial powerhouse. The 2025 ratios prove that its Wealth Management business provides a high-floor valuation, while the Investment Banking arm provides a high-ceiling growth catalyst during market upswings.
Comparative Analysis: Morgan Stanley vs. JPMorgan Chase vs. Goldman Sachs (FY 2025)
The following table and analysis compare the 2025 performance of the three titans of Wall Street. Note that while JPMorgan (JPM) operates as a universal bank, Morgan Stanley (MS) and Goldman Sachs (GS) are more focused on capital markets and wealth/asset management.
| Key Metric (FY 2025) | Morgan Stanley (MS) | JPMorgan Chase (JPM) | Goldman Sachs (GS) |
| Net Revenue | $63.5B | $175.2B | $52.8B |
| Net Income | $12.1B | $51.5B | $10.4B |
| ROTCE (Return on Tangible Equity) | 21.6% | 19.5% | 15.2% |
| Efficiency Ratio | 68.4% | 52.0% | 64.5% |
| CET1 Ratio (Capital Adequacy) | 15.0% | 14.2% | 14.8% |
| Client Assets (WM/AUM) | $6.5T (WM) | $5.2T (AWM) | $3.1T (AS&WM) |
Strategic Peer Analysis
1. Profitability & Shareholder Returns (ROTCE)
- Morgan Stanley (MS): The standout winner in capital efficiency. Its 21.6% ROTCE proves that its light-capital, fee-based Wealth Management model generates higher returns per dollar of equity than the more balance-sheet-intensive models of its peers.
- JPMorgan (JPM): Despite record-breaking net income, its ROTCE is slightly diluted by its massive commercial bank, which requires significantly higher regulatory capital buffers.
- Goldman Sachs (GS): While seeing a strong rebound in Investment Banking, its lower ROTCE (15.2%) reflects the ongoing transition of its Asset Management segment and higher reliance on volatile principal investments.
2. Operational Efficiency (Efficiency Ratio)
- JPMorgan (JPM): Maintains the “Gold Standard” at 52.0%. JPM’s unmatched scale in retail banking and payments infrastructure allows it to spread fixed technology costs across a much larger revenue base.
- MS vs. GS: MS’s ratio is influenced by the payout structure in Wealth Management (commissions to advisors), whereas GS faces higher compensation-to-revenue ratios in its elite investment banking tiers. MS showed better operating leverage in 2025 as it successfully scaled its top line.
3. Business Model Stability & Market Dominance
- The Wealth Powerhouse (MS): MS has successfully created a “valuation floor” with its $9.3 trillion client asset ecosystem. This provides predictable, recurring revenue that GS lacks and that JPM’s diversified model dilutes.
- The M&A Leader (GS): Goldman remains the “High-Beta” play. It still holds the top spot in M&A advisory and equity underwriting market share (Wallet Share), making it the primary beneficiary of a booming IPO market, but more vulnerable to market downturns.
- The Fortress (JPM): As a universal bank, JPM dominates everything from credit cards to institutional clearing. Its “Fortress Balance Sheet” allows it to remain aggressive in lending even when MS and GS have to pull back to preserve capital.
4. Capital Fortification (CET1 Ratio)
- MS (15.0%) holds the most robust capital position among the three. This high CET1 ratio gives MS the “dry powder” to either pursue strategic acquisitions (similar to the E*TRADE/Eaton Vance deals) or maintain more aggressive share buybacks than JPM, which faces tighter regulatory constraints as a Global Systemically Important Bank (G-SIB).
Summary Conclusion
- Best Growth/Efficiency Hybrid: Morgan Stanley (Highest ROTCE and Asset Inflows).
- Best Scale & Defensive Moat: JPMorgan Chase (Unrivaled Earnings Power and Efficiency).
- Best Cyclical Upside: Goldman Sachs (Poised for maximum gain in a prolonged deal-making cycle).
5-Year Price-to-Book (P/B) Ratio Analysis (2021–2025)
The Price-to-Book ratio is a critical valuation metric for banks. For Morgan Stanley (MS), the trend over the last five years tells a story of “Valuation Re-rating”—transitioning from being valued as a volatile trading house to a steady, high-margin wealth management giant.
| Year (Year-End) | Morgan Stanley (MS) | JPMorgan Chase (JPM) | Goldman Sachs (GS) | Market Sentiment |
| 2021 | 1.85x | 1.70x | 1.35x | Post-pandemic boom; MS transformation gains premium. |
| 2022 | 1.62x | 1.45x | 1.10x | Rate hike cycle begins; valuations compress across the sector. |
| 2023 | 1.58x | 1.55x | 1.05x | MS proves defensive; GS struggles with retail banking exit. |
| 2024 | 1.95x | 1.85x | 1.25x | Anticipation of IB recovery drives broad re-valuation. |
| 2025 | 2.25x | 2.10x | 1.45x | Record Highs: Market prices in MS’s 21%+ ROTCE dominance. |
Strategic Valuation Insights
1. The “Wealth Management Premium”
Traditionally, investment banks like Goldman Sachs trade near or slightly above book value (1.0x – 1.3x) due to the inherent volatility of trading and advisory.
- The MS Shift: Over the last five years, MS has consistently commanded a premium over GS and even surpassed JPM in 2025. This indicates that investors now view MS as a capital-light services firm rather than a traditional bank.
- Predictability: The market assigns a higher multiple to Wealth Management’s recurring fee income compared to the “hit-or-miss” nature of trading gains.
2. Correlation Between ROTCE and P/B
In banking, the P/B ratio is mathematically driven by the Return on Tangible Common Equity (ROTCE).
- MS’s jump to a 2.25x P/B in 2025 is directly supported by its 21.6% ROTCE.
- Because MS generates more profit for every dollar of equity than GS (15.2% ROTCE), investors are willing to pay a much higher price for that “engine.”
3. Drivers of the 2025 Peak Valuation
- AI Integration: The market is pricing in future margin expansion as MS uses AI to increase the “Assets per Advisor” capacity.
- Asset Inflows: Consistent Net New Assets (NNA) of ~$350B annually provide a highly visible revenue growth runway.
- Shareholder Returns: Aggressive buybacks at high valuations typically signal management’s confidence in the “intrinsic value” of the business model, further supporting the P/B ratio.
Investment Risk Note
While a 2.25x P/B reflects immense market confidence, it also places MS in “expensive” territory. If the pace of net new asset inflows slows down in 2026 or if capital markets cool significantly, the stock may face a mean-reversion risk toward its 5-year average of 1.8x – 1.9x.
Source:
- https://www.morganstanley.com/content/dam/msdotcom/en/about-us-ir/shareholder/4q2025.pdf
- https://www.morganstanley.com/about-us-ir
- https://www.jpmorganchase.com/ir/quarterly-results
- https://www.goldmansachs.com/investor-relations/financials/quarterly-earnings
- https://finance.yahoo.com/quote/MS/key-statistics
- https://www.macrotrends.net/stocks/charts/MS/morgan-stanley/price-book
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