Morgan Stanley Posts $16.8B Revenue and 18.2% ROTCE in Q2 2025 Amid Record Client Flows

Morgan Stanley delivered robust second-quarter results for 2025, driven by strong performance in its core segments: Institutional Securities, Wealth Management, and Investment Management. The firm reported net revenues of $16.8 billion, up 12% year-over-year, with earnings per share (EPS) of $2.13—an increase of 17% from Q2 2024. Return on tangible common equity (ROTCE) stood at 18.2%, reflecting consistent execution across the business in a mixed market environment.

CEO Ted Pick emphasized the firm’s stability, noting that “six consecutive quarters of solid earnings reflect consistent performance in varied market conditions.” He highlighted continued strength in global markets, growth in client assets, and the bank’s ability to act as a trusted advisor.

Quantitative Overview: Revenue Growth, Solid Profitability

Morgan Stanley posted net revenues of $16.792 billion in Q2 2025, a 12% increase over the $15.019 billion reported in the same quarter last year. Net income rose to $3.539 billion, up 15% year-over-year, while pre-tax income reached $4.622 billion, a 13% annual increase.

Diluted earnings per share came in at $2.13, up from $1.82 in Q2 2024. Return on equity (ROE) reached 13.9%, and return on tangible common equity (ROTCE) climbed to 18.2%.

The firm maintained an efficiency ratio of 71%, with compensation expenses representing 43% of revenue and non-compensation expenses at 28%.

Institutional Securities: Trading Strength Offsets Investment Banking Decline

Institutional Securities generated $7.64 billion in net revenues, a 9% increase from $6.98 billion in Q2 2024. The division benefited from robust client activity in trading, particularly in equities.

Investment banking revenues fell 5% year-over-year to $1.54 billion. Advisory revenues declined to $508 million amid a drop in completed M&A deals. Equity underwriting, however, surged to $500 million on strong activity in follow-ons, convertibles, and IPOs. Fixed income underwriting dropped to $532 million, primarily due to fewer non-investment-grade bond issuances.

Equity trading revenues jumped 23% to $3.72 billion, driven by gains across regions and business lines, with particularly strong results in prime brokerage. Fixed income trading revenues rose 9% to $2.18 billion, helped by activity in macro products, although commodity trading was weaker.

Credit loss provisions increased to $168 million, up from $54 million a year ago, reflecting growth in the corporate loan book and a more cautious macroeconomic outlook. Total expenses for the segment rose 10% to $5.36 billion.

Wealth Management: Record Client Flows and Double-Digit Revenue Growth

Wealth Management continued to be a major driver of firm-wide performance, posting record revenues of $7.76 billion, up 14% year-over-year.

Asset management revenues rose 11% to $4.41 billion, supported by higher client asset levels and sustained fee-based flows. Fee-based client assets grew to $2.478 trillion, and the segment added $59.2 billion in net new assets during the quarter. Fee-based flows totaled $42.8 billion, a sharp increase from $26 billion a year ago.

Transactional revenues rose 17% to $1.26 billion, fueled by increased client engagement. Net interest income reached $1.91 billion due to growth in the lending portfolio, which expanded to $168.9 billion.

Pre-tax income for the division totaled $2.2 billion, representing a pre-tax margin of 28.3%.

Compensation expenses rose to $4.15 billion, reflecting higher performance-linked pay and deferred cash compensation (DCP). Non-compensation expenses increased 3% to $1.39 billion.

Investment Management: Rebound with Positive Flows and Higher AUM

Investment Management reported net revenues of $1.55 billion, up 12% from $1.39 billion in Q2 2024.

Asset management and related fees grew to $1.434 billion, supported by higher average assets under management (AUM), which reached $1.713 trillion. The segment recorded $10.8 billion in long-term net inflows, reversing the $1.2 billion outflow seen a year earlier.

Performance-based income and other revenues totaled $118 million, a significant jump from $44 million in Q2 2024, thanks to carried interest gains and favorable mark-to-market adjustments.

Pre-tax income for the segment rose to $323 million from $222 million a year ago. Total expenses increased 6% to $1.23 billion, including a 7.9% rise in compensation tied to carried interest.

Capital Strategy and Shareholder Returns

Morgan Stanley repurchased $1 billion worth of shares during the quarter and announced a new share repurchase program of up to $20 billion with no expiration date. The firm also raised its quarterly dividend by 8.1% to $1.00 per share, payable in August 2025.

Book value per share increased to $61.59, and tangible book value per share rose to $47.25. The standardized Common Equity Tier 1 (CET1) capital ratio stood at 15.0%, and the supplementary leverage ratio (SLR) remained steady at 5.5%.

Strategic View: Consistency with Caution

Morgan Stanley’s Q2 2025 results demonstrate resilience and operational breadth, particularly in Wealth Management and Trading. The firm continues to benefit from its diversified model and disciplined cost structure.

However, the rise in credit loss provisions and weakness in investment banking advisory signal ongoing macroeconomic challenges. The firm will need to balance continued growth with prudent risk management amid an uncertain global environment.

That said, the bank’s robust capital position, shareholder returns, and strong client flows highlight its long-term earnings power and strategic focus on durable revenue streams.