Morgan Stanley (MS) FY2025 10-K and Q2 FY2026 10-Q Summary

Business

Source: 2025 Form 10-K, accession 0000895421-26-000086 (Business; MD&A introduction and Business Segments).

Morgan Stanley is a global financial services firm. It advises clients, and it originates, trades, manages and distributes capital for corporations, governments, financial institutions and individuals. It earns its revenue in three business segments. In 2025 the firm had $70.6 billion of net revenues: Institutional Securities $33.1 billion, Wealth Management $31.8 billion and Investment Management $6.5 billion (segment figures are before intersegment eliminations). The firm calls its model the "Integrated Firm": one client can be served by more than one segment, and it works to move clients between channels, for example from workplace stock-plan participant to advisor-led wealth client.

Institutional Securities (IS). This segment serves corporations, governments, financial institutions and ultra-high net worth clients.

• Investment Banking. Fees from M&A and restructuring advice and from underwriting equity, debt and other securities. This was $7.6 billion in 2025.
• Markets. Comprises Equity ($15.6 billion in 2025) and Fixed Income ($8.7 billion).
• Equity revenue comes from Financing (prime brokerage, margin and securities lending, swaps) and Execution services (commissions and market-making in cash equities and derivatives).
• Fixed Income makes markets in global macro products (rates, FX), credit products (corporate bonds, securitized products, plus related lending) and commodities (mainly electricity, natural gas, oil and metals).
• Markets also includes Asia wealth management.
• Lending and other. IS originates corporate and commercial real estate loans, provides secured lending facilities and does research. It also books its equity-method share of the Japanese securities joint venture with Mitsubishi UFJ Financial Group (MUFG), its long-standing strategic partner.

Wealth Management (WM). WM serves individual investors, including high and ultra-high net worth individuals, plus businesses and institutions. It is primarily a U.S. business and works through three channels:

• Advisor-Led: financial-advisor brokerage and advisory accounts.
• Self-Directed: the E*TRADE platform.
• Workplace: stock plan administration, retirement and financial-wellness services, which act as a funnel into advisor relationships.

WM has three revenue lines:

• Asset management revenues, mainly fees on fee-based assets, were the largest line, at $18.6 billion of WM's $31.8 billion in 2025.
• Net interest income was $7.9 billion. It comes from sweeping client cash into the two U.S. bank subsidiaries, Morgan Stanley Bank, N.A. (MSBNA) and Morgan Stanley Private Bank, N.A. (MSPBNA), and lending it out as securities-based loans, residential mortgages and tailored loans.
• Transactional revenue was $4.6 billion.

Investment Management (IM). IM offers equity, fixed income, alternatives and solutions (private equity, credit, real estate, infrastructure, multi-asset), and liquidity and overlay strategies. It serves institutions directly and individuals through intermediaries. Revenue is mainly management fees on assets under management ($6.1 billion in 2025), plus performance-based income including carried interest ($457 million in 2025). The Parametric customized-solutions franchise held $524 billion of long-term AUM at year-end 2025. Parametric sits in the Alternatives and Solutions asset class and carries lower average fee rates than the rest of that class.

Scale. At December 31, 2025 the firm had:

• total client assets of $9.3 trillion (WM client assets plus IM AUM, including about $350 billion counted in both);
• total assets of $1.42 trillion and deposits of $415.5 billion;
• about 83,000 employees.

Its headquarters are in New York City, with principal offices in London, Frankfurt, Tokyo and Hong Kong. The current shape reflects two large acquisitions: E*TRADE, closed October 2, 2020, which affects period comparisons for Wealth Management, and Eaton Vance, closed March 1, 2021, which affects them for Investment Management.

Regulation and competition. Morgan Stanley is a bank holding company and financial holding company supervised by the Federal Reserve, and it is a U.S. global systemically important bank (G-SIB). That subjects it to:

• Basel III capital rules, the stress capital buffer (SCB) and a G-SIB capital surcharge;
• total loss-absorbing capacity (TLAC) and long-term debt requirements;
• the Volcker Rule, resolution planning and derivatives regulation.

Its broker-dealers (Morgan Stanley & Co. LLC and Morgan Stanley Smith Barney LLC) are regulated by the SEC and FINRA. It competes with:

• commercial and investment banks;
• broker-dealers, registered investment advisers and digital investing platforms;
• traditional and alternative asset managers;
• fintech and non-financial firms built on technologies such as tokenization.

Electronic trading and generative AI keep pressure on IS pricing, and IM faces continued fee pressure.

Risk factors

Source: 2025 Form 10-K, Part I, Item 1A, accession 0000895421-26-000086. The June 2026 Form 10-Q makes no changes to these risk factors.

Market risk

• Results move with market levels, volatility and client activity across all three segments. IS deal volumes and trading, WM asset levels and flows, and IM AUM and carried interest all fall in weak or disrupted markets.
• Severe events can make hedges ineffective and positions hard to value or exit.
• Interest rates. Net interest income generally rises with higher rates and falls with lower ones. Rate moves and competitive deposit pricing have changed clients' cash allocation, the deposit mix and loan demand, and have hurt net interest income in the past.
• Concentration. Large positions in underwriting (including block trades), market-making, investing and lending (including margin lending) can produce outsized losses.

Credit risk

• IS carries significant exposure through:
• corporate lending commitments and derivatives counterparties;
• clearing-broker guarantees to clearinghouses, and clearing-member exposure to other members' defaults;
• secured financing against real estate and securities whose collateral may prove insufficient.
• WM lends against securities, residential property (including HELOCs) and, in tailored lending to ultra-high net worth clients, private investments and commercial real estate.
• Reserves depend on models and forecasts of GDP, spreads, rates and real-estate values.
• The default of a large financial institution or clearinghouse could spread through the system.

Operational, technology and cyber risk

• The firm depends on processing very high transaction volumes and on third parties and their own providers. Concentration among those providers creates industry-wide failure points.
• Risks include human error and misconduct, data-quality failures, and new technologies such as generative AI.
• Cyber threats are rising, including nation-state actors, AI-enhanced social engineering and quantum computing. A breach could go undetected for a long time, and insurance and indemnities may not cover the losses.

Liquidity and funding risk

• The firm relies on external funding: unsecured debt, secured financing and deposits.
• A credit-rating downgrade would raise funding costs and could trigger extra collateral calls or termination payments on OTC derivatives.
• The Parent Company has no operations. It depends on dividends and other payments from subsidiaries, which regulators in the U.S. and abroad can restrict or "ring-fence".

Risk management and model risk. Risk models built on historical behaviour may not capture future exposures, especially as the business grows through acquisitions, AI and tokenization.

Legal, regulatory and compliance risk

• Extensive regulation. The firm faces heavy and changing regulation covering capital, liquidity, TLAC, the Volcker Rule, derivatives, consumer protection, AML and sanctions, and AI and tokenization. Changes can limit businesses, raise costs, or restrict dividends and buybacks.
• Capital actions. Dividends and buybacks depend on Federal Reserve stress tests, the stress capital buffer and capital plans.
• Resolution strategy. The preferred strategy is "single point of entry". Losses would fall on Parent Company shareholders and holders of its eligible long-term debt before creditors of operating subsidiaries. A secured support agreement, funded through Morgan Stanley Holdings LLC, makes subsidiary claims effectively senior to the Parent Company's unsecured debt.
• Litigation and investigations. Antitrust, class actions and government investigations can bring large or indeterminate damages, admissions requirements and collateral consequences.
• Conflicts of interest. These are heightened by Integrated Firm cross-selling and multiple brands.

Competitive environment

• Intense competition, including from tokenization-focused and non-financial entrants, causes pricing pressure. Examples include fee and commission cuts and higher deposit rates offered by competitors.
• Electronic and automated trading and generative AI compress revenues.
• The firm must attract and keep talent while compensation is regulated more strictly than in other industries.

Other risks

• International operations expose the firm to expropriation, capital controls, tariffs, data-localization rules, U.S.–China tensions, hostilities and emerging-market instability.
• Sanctions, AML and anti-corruption violations can carry severe penalties.
• The firm may fail to capture expected value from acquisitions, divestitures, joint ventures and minority stakes, including the MUFG alliance, or to integrate them.

Management's discussion, fiscal 2025

Source: 2025 Form 10-K, Item 7 (MD&A), accession 0000895421-26-000086; firmwide targets from the strategic update furnished with the Form 8-K of January 15, 2026, accession 0000895421-26-000007.

Firm-level results

• Revenue and earnings. Net revenues were $70.6 billion, up 14% from $61.8 billion in 2024. Net income applicable to Morgan Stanley was $16.9 billion, up 26% from $13.4 billion. Diluted EPS was $10.21, up 28% from $7.95.
• Returns and efficiency. ROE was 16.6% and ROTCE 21.6%, against a 20% ROTCE goal. The expense efficiency ratio improved to 68% from 71%.
• Operating environment. Management described 2025 as resilient. Markets rebounded from early-year uncertainty, capital-markets activity built momentum and interest rates fell.
• Regions. Americas revenues rose 13%, EMEA 16% and Asia 23%, the last driven by Equity and Investment Banking.

Expenses and credit

• Compensation. Compensation and benefits rose 12% to $29.2 billion on higher formulaic payouts to WM advisors and higher IS incentive pay.
• It included $144 million of severance from a March 2025 workforce action that affected about 2% of staff.
• Non-compensation. Non-compensation expenses rose 8% to $19.1 billion on execution-related costs and technology spend.
• Credit provisions. The provision for credit losses was $349 million, up from $264 million. It reflected growth in corporate loans and secured lending facilities and specific commercial real estate loans.

Institutional Securities. Net revenues were $33.1 billion, up 18%, and pre-tax margin was 34%.

• Investment Banking: $7.6 billion, up 23%. Gains came across regions and businesses, especially underwriting:
• advisory, on more completed M&A;
• equity underwriting, on converts and IPOs;
• fixed income underwriting, on event-driven bond and loan issuance.
• Equity: $15.6 billion, up 28%. Financing grew on higher client balances and activity, and Execution on derivatives and cash-equity activity.
• Fixed Income: $8.7 billion, up 4%. Macro and credit rose while commodities fell.
• Other net revenues: fell to $1.1 billion from $1.3 billion. Net interest and fees were lower after the sale of held-for-sale corporate loans in the first quarter of 2025.

Wealth Management. Net revenues were $31.8 billion, up 12%, with a pre-tax margin of 29.3%.

• Asset management fees: $18.6 billion, up 13%, on higher markets and cumulative fee-based flows.
• Transactional revenues: $4.6 billion, up 19%.
• Net interest income: $7.9 billion, up 8%. Lending growth and a changing balance-sheet mix were partly offset by lower rates.
• Flows: net new assets were $356 billion and fee-based asset flows $160 billion.
• Stock-plan participants dipped slightly after the previously announced disposition of the EMEA stock plan business.

Investment Management. Net revenues were $6.5 billion, up 11%.

• Asset management fees: $6.1 billion, up 8%, on higher average AUM.
• Performance-based income and other: rose to $457 million from $234 million, on accrued carried interest in infrastructure and real estate funds.
• Flows: equity outflows continued and were offset by inflows into Alternatives and Solutions and Fixed Income.

Balance sheet and capital at December 31, 2025

• Capital ratios. Standardized CET1 was 15.0% against an 11.8% requirement, and the supplementary leverage ratio (SLR) was 5.4%.
• Stress capital buffer. The SCB has been 4.3% since October 1, 2025, and the Federal Reserve expects it to stay at that level until October 1, 2027.
• G-SIB surcharge. Based on 2025 data, the firm estimates its surcharge may rise from 3.0% to 3.5%, not before January 1, 2028.
• Leverage rule change. The firm early-adopted the final enhanced supplementary leverage ratio (eSLR) rule on January 1, 2026. This cut its required SLR to 3.5% from 5.0%.
• Funding. Borrowings rose to $349 billion from $289 billion and deposits to $415.5 billion.
• Dividend. The quarterly dividend was raised to $1.00 from $0.925 in July 2025.

Firmwide targets (January 15, 2026 strategic update). Management restated its goals as:

• ROTCE of 20%;
• expense efficiency ratio of 70%;
• WM pre-tax margin of 30%;
• $10 trillion+ of total client assets;
• durable IS wallet-share gains.

It put excess CET1 at about 320 basis points over the 2025 requirement. The firm says these targets assume a normal market environment.

Current quarter, 2Q 2026

Source: Form 10-Q for the quarter ended June 30, 2026, accession 0000895421-26-000212 (MD&A and Part II); earnings release furnished with the Form 8-K of July 15, 2026, accession 0000895421-26-000207; Form 8-K of June 24, 2026, accession 0000950103-26-009448.

Headline results

• Revenue and earnings. Net revenues were $21.3 billion, up 27% from $16.8 billion in 2Q 2025. Net income applicable to Morgan Stanley was $5.6 billion, up 58% from $3.5 billion. Diluted EPS was $3.46, up 62% from $2.13. The earnings release called revenue and EPS records.
• Returns and efficiency. ROE was 20.7% and ROTCE 26.6%, against 18.2% a year earlier. The efficiency ratio was 65%, against 71%. Pre-tax margin was 34%.
• First half. Net revenues were $41.9 billion (up 21%), net income $11.1 billion (up 42%) and diluted EPS $6.90 (up 46%).

Environment. Management described a strong quarter with active capital markets, supported by AI adoption and better investor sentiment. It listed geopolitical risk, inflation, rising asset prices, growth and the path of monetary policy as ongoing uncertainties. It said it is monitoring Middle East developments and that direct exposure to the region remains limited.

Institutional Securities. Net revenues were $11.0 billion, up 44%, and pre-tax margin was 39%. Net income applicable to Morgan Stanley roughly doubled to $3.2 billion.

• Investment Banking: $2.4 billion, up 58%. Advisory rose 57% to $798 million, equity underwriting 70% to $851 million and fixed income underwriting 48% to $788 million. Completed M&A volume was $320 billion, against $171 billion a year earlier.
• Equity: $6.3 billion, up 69%, led by Asia. Financing grew on client activity and balances, and Execution on derivatives and cash equities.
• Fixed Income: $2.5 billion, up 13%, on corporate credit and lending growth in securitized products. Macro was flat.
• Other: a $152 million loss, against a $202 million gain, from mark-to-market losses on corporate loans net of hedges.

Wealth Management. Net revenues were $8.9 billion, up 14%, with a pre-tax margin of 30.5%.

• Asset management fees: $5.3 billion, up 19%.
• Net interest income: $2.3 billion, up 18%, on lending growth and higher average sweep deposits.
• Transactional revenues: fell 8% to $1.2 billion. The prior-year quarter included $294 million of gains on deferred cash-based compensation (DCP) investments. Since the first quarter of 2026 the firm hedges WM DCP awards primarily with derivatives: cash-flow hedges for most unvested awards and economic hedges for vested awards. Changes in those hedges are recorded through other comprehensive income and compensation expense rather than revenue. It has also stopped publishing DCP-adjusted non-GAAP measures.
• Flows: net new assets were a record $148 billion, against $59 billion a year earlier. Just over half came from IPO-related inflows from certain Workplace clients. Fee-based flows were $39 billion.
• Client assets and lending: WM client assets reached $8.1 trillion, up from $7.4 trillion at year-end. Bank lending to WM clients was $196 billion and deposits $436 billion.
• Self-directed trading: daily average revenue trades (DARTs) rose to 1.28 million from 0.98 million.

Investment Management. Net revenues were $1.6 billion, up 6%, on higher average AUM. Average fee rates fell to 28 basis points from 31 as the mix shifted.

• AUM reached $2.0 trillion, with long-term net flows of $7.5 billion.
• Equity net outflows of $13 billion were outweighed by net inflows of $13 billion into Alternatives and Solutions and $7 billion into Fixed Income.

Milestones

• Client assets. Total client assets reached $10.1 trillion at June 30, 2026, against $9.3 trillion at year-end. That meets the firm's $10 trillion goal.
• Legal-entity reorganization. Two moves aimed at growing eligible assets at MSBNA:
• on February 14, 2026, the fixed income business of Morgan Stanley Capital Services LLC was merged into MSBNA;
• on March 14, 2026, MSBNA acquired the affiliate Morgan Stanley Europe SE together with Morgan Stanley Bank AG.

In connection with these moves, the segment balance-sheet allocation was changed, moving certain cash and liquid securities from WM to IS.

• Severance. First-half 2026 compensation included $178 million of severance from a March 2026 workforce action.

Capital, funding and capital return

• Capital ratios. Standardized CET1 was 14.9% at June 30, 2026, against an 11.8% requirement. The July 15 earnings release had printed a preliminary 14.8%. Risk-weighted assets grew to $589 billion from $553 billion on lending, financing and derivatives. The SLR was 4.9% against a 3.5% requirement.
• Balance sheet. Total assets rose to $1.68 trillion from $1.42 trillion. Borrowings were $393 billion and deposits $446 billion.
• Buybacks. The firm repurchased $1.5 billion of stock in the quarter (8 million shares at an average $197.64) and $3.25 billion in the first half.
• Capital return ahead. After the 2026 stress test cycle, the firm raised its quarterly dividend to $1.15 from $1.00 and reauthorized a buyback program of up to $20 billion. Both take effect in the third quarter of 2026.

Regulatory developments

• Basel III proposal. On March 19, 2026, U.S. banking agencies proposed Basel III revisions. These would replace the Advanced Approach with an "Expanded Approach" to risk-weighted assets that adds operational-risk and credit valuation adjustment components.
• G-SIB surcharge proposal. The Federal Reserve proposed changes the same day that would recalibrate Method 2 of the surcharge, including its short-term wholesale funding component. The firm is evaluating both proposals.
• Resolution plan. In May 2026 regulators gave feedback on the 2025 targeted resolution plan and identified no shortcomings or deficiencies.
• Bank stress tests. MSBNA becomes subject to company-run stress-test requirements from 2027.

Litigation to watch

• Cash sweep class actions. Class actions are pending against Morgan Stanley Smith Barney LLC and E*TRADE Securities. They allege a failure to pay a reasonable rate on cash sweep balances. State securities regulators are also asking about brokerage cash swept to the affiliate bank deposit program.
• Antitrust cases. Interest rate swaps (the swap execution facility operators' claims) and VRDO antitrust cases are still pending.

Subsequent events

Source: Form 10-Q for the quarter ended June 30, 2026, accession 0000895421-26-000212 (Note 1, Note 13 "Contingencies, Legal", MD&A "Capital Management" and Part II, Item 2); Form 8-K of July 15, 2026, accession 0000895421-26-000207.

In its financial statement notes, Morgan Stanley states that it evaluated subsequent events through the 10-Q filing date of August 4, 2026. It identified no recordable or disclosable events beyond those reported in the statements and notes. The 10-Q discloses no acquisition, divestiture or new financing after June 30, 2026. Matters dated after quarter-end:

• July 13, 2026, VRDO antitrust litigation. In City of Philadelphia, et al. v. Bank of America Corporation, et al. (SDNY), defendants including Morgan Stanley filed a motion for summary judgment. The suit alleges that defendants inflated interest rates on variable rate demand obligations; the class was certified and the Supreme Court denied certiorari on April 20, 2026.
• July 15, 2026, second-quarter results and dividend. The firm released 2Q 2026 results and announced a quarterly dividend of $1.15 per share, payable August 14, 2026 to holders of record on July 31, 2026. This is the first dividend at the higher rate announced on June 24.
• July 15, 2026, MUFG share-sale plan. A sales plan under which MUFG sells Morgan Stanley shares to the firm, as part of the firm's repurchase authorization, was recommenced effective July 15, 2026. It had been suspended since December 10, 2020. The plan exists only to keep MUFG's ownership below 24.9%, in line with its passivity commitments to the Federal Reserve, and does not affect the strategic alliance or the Japanese joint venture.
• Third quarter of 2026, $20 billion repurchase program. The reauthorized multi-year program of up to $20 billion took effect at the start of the third quarter. At June 30, $14.2 billion remained under the prior authorization.
• July 16, 2026, ETRADE cash sweep litigation. A consolidated complaint was filed in In re E\TRADE Cash Sweep Litigation (D.N.J.). It names Morgan Stanley Smith Barney LLC and ETRADE Securities LLC. Together with the SDNY action (Estate of Sherlip, et al. v. Morgan Stanley, et al.*), the complaints seek class certification, unspecified compensatory damages, equitable and injunctive relief, and treble damages.
• Credit ratings at July 31, 2026. The Parent Company and both U.S. bank subsidiaries carried Stable outlooks from every agency listed. The Parent Company's long-term ratings were A1 (Moody's), A- (S&P), A+ (Fitch), AA (low) (DBRS) and A+ (R&I).