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 net revenues growing by 6% and a pre-tax margin of 26.6%. Investment Management reported a 16% increase in net revenues, primarily due to higher asset management fees and performance-based income.

The company’s capital position remains strong, with a Standardized Common Equity Tier 1 capital ratio of 15.3% as of March 31, 2025. Morgan Stanley accreted $1.9 billion of Common Equity Tier 1 capital during the quarter, further strengthening its balance sheet.

Overview of Financial Results

Morgan Stanley reported the following key financial metrics for the first quarter of 2025:

Metric	Q1 2025	Q1 2024	% Change
Net Revenues	$17,739 million	$15,136 million	+17%
Net Income Applicable to Morgan Stanley	$4,157 million	$3,266 million	+26%
Earnings per Diluted Common Share	$2.60	$2.02	+29%
Expense Efficiency Ratio	68%	71%	-3 percentage points
Return on Equity (ROE)	17.4%	14.5%	+2.9 percentage points
Return on Tangible Common Equity (ROTCE)	23.0%	19.7%	+3.3 percentage points

The firm’s strong financial performance was driven by robust results across its business segments, as well as disciplined expense management. The increase in net revenues, net income, and earnings per share reflects the company’s ability to capitalize on market opportunities and deliver value to its clients.

Business Segment Results

Morgan Stanley’s three business segments - Institutional Securities, Wealth Management, and Investment Management - all contributed to the firm’s overall success in the first quarter of 2025.

Institutional Securities The Institutional Securities business segment reported net revenues of $8,983 million, a 28% increase compared to the prior year quarter. This was primarily 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.

Investment Banking revenues increased by 8%, reflecting higher Fixed Income underwriting and Advisory revenues, partially offset by lower Equity underwriting revenues. Equity and Fixed Income net revenues also increased, driven by higher client activity and gains on inventory held to facilitate client transactions.

The Provision for credit losses on loans and lending commitments was $91 million, primarily related to portfolio growth in secured lending facilities and corporate loans, as well as deterioration in the macroeconomic outlook.

Wealth Management The Wealth Management business segment delivered net revenues of $7,327 million, a 6% increase compared to the prior year quarter. This was primarily driven by higher Asset management revenues, partially offset by lower Transactional revenues.

Asset management revenues increased by 15%, reflecting higher fee-based assets due to higher market levels and positive fee-based flows. Transactional revenues decreased by 15%, primarily due to losses on deferred compensation plan (DCP) investments compared to gains in the prior year quarter, partially offset by higher client activity.

The Provision for credit losses on loans and lending commitments was $44 million, primarily related to certain specific loans, including residential real estate loans related to the California wildfires.

Investment Management The Investment Management business segment reported net revenues of $1,602 million, a 16% increase compared to the prior year quarter. This was primarily driven by higher Performance-based income and other revenues, as well as higher Asset management and related fees.

Asset management and related fees increased by 8%, reflecting higher average assets under management (AUM) on higher market levels. Performance-based income and other revenues increased significantly, primarily due to higher accrued carried interest in infrastructure funds.

The Provision for credit losses on loans and lending commitments was not material for the Investment Management business segment.

Liquidity and Capital Resources

Morgan Stanley maintains a strong liquidity position, with total Liquidity Resources of $351.7 billion as of March 31, 2025. This includes $344.5 billion of unencumbered high-quality liquid assets (HQLA), such as U.S. government obligations, U.S. agency and agency mortgage-backed securities, and non-U.S. sovereign obligations.

The firm’s Standardized Common Equity Tier 1 capital ratio was 15.3% as of March 31, 2025, well above the regulatory minimum requirement of 13.5%. The company’s Tier 1 leverage ratio and Supplementary Leverage Ratio (SLR) were both 6.9% and 5.6%, respectively, also exceeding regulatory minimums.

Morgan Stanley’s total assets increased to $1.3 trillion as of March 31, 2025, compared to $1.2 trillion at the end of 2024. This growth was primarily driven by increases in Trading assets, Loans, and Securities purchased under agreements to resell.

The company’s funding profile remains diversified, with a mix of secured and unsecured financing sources, including borrowings, bank notes, securities sold under agreements to repurchase, securities lending, deposits, and other sources. Borrowings increased to $305.4 billion as of March 31, 2025, from $288.8 billion at the end of 2024, primarily due to issuances net of maturities and redemptions.

Strengths and Weaknesses

Strengths:

• Diversified business model with strong performance across Institutional Securities, Wealth Management, and Investment Management segments
• Robust capital and liquidity position, exceeding regulatory requirements
• Disciplined expense management, as evidenced by the improvement in the expense efficiency ratio
• Ability to generate solid returns for shareholders, with ROE and ROTCE above 17% and 23%, respectively
• Consistent growth in net revenues, net income, and earnings per share

Weaknesses:

• Potential exposure to macroeconomic and market volatility, which could impact the firm’s trading and investment activities
• Reliance on unsecured financing, which could be affected by changes in market conditions or the firm’s credit ratings
• Ongoing regulatory scrutiny and the need to comply with evolving capital and liquidity requirements

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 firm is closely monitoring these developments and their potential effects on its future operating results.

Despite the challenging macroeconomic conditions, Morgan Stanley remains well-positioned to navigate the current environment. The company’s diversified business model, strong capital and liquidity position, and disciplined risk management provide a solid foundation for continued success.

Looking ahead, the firm will continue to focus on delivering exceptional client service, investing in its core businesses, and maintaining a prudent approach to risk management. By leveraging its strengths and addressing its weaknesses, Morgan Stanley is poised to capitalize on future growth opportunities and create long-term value for its shareholders.