Morgan Stanley Posts Record $10.21 EPS on Wealth Surge
Investment bank caps best year ever with 21.6% return on equity. Client assets hit $9.3 trillion as wealth management strategy pays off.
Morgan Stanley delivered the earnings report its strategy demanded.
The investment bank reported record full-year EPS of $10.21 on Wednesday, capping a transformation from trading-heavy volatility machine to diversified wealth manager. Return on tangible common equity hit 21.6% for 2025—numbers that would have seemed impossible a decade ago when the firm struggled with capital intensity and regulatory scrutiny.
Shares rose 5.8% Thursday, outpacing Goldman Sachs and confirming that both Wall Street giants delivered for shareholders this quarter.
The Wealth Engine
Client assets reached $9.3 trillion by year-end, up from $8.1 trillion in 2024. That's not just market appreciation—Morgan Stanley pulled in meaningful net new assets as high-net-worth clients consolidated relationships.
The wealth management division posted $8.4 billion in net revenue for Q4, up from $7.5 billion a year earlier. That 12% growth came despite rate cuts that pressured net interest income on cash sweep balances.
CEO Ted Pick's thesis is straightforward: wealthy clients want a single relationship for banking, brokerage, and advice. Morgan Stanley spent years and billions building that platform through the E*Trade and Eaton Vance acquisitions. Now it's producing consistent, capital-light revenue that doesn't swing with trading volatility.
Investment Banking Roared Back
The institutional securities division contributed $7.9 billion to Q4 revenue, with investment banking fees of $2.4 billion—up 47% year-over-year.
Debt underwriting led the recovery. Companies refinanced pandemic-era borrowings, high-yield issuance accelerated, and leveraged buyout financing returned as private equity sponsors put capital to work. Morgan Stanley's fixed income capital markets desk captured share from European competitors still working through restructurings.
Advisory fees rebounded too, though not as dramatically as Goldman's M&A dominance might suggest. Morgan Stanley tends to win technology and healthcare mandates; Goldman skews toward financial sponsors and mega-deals. Both models worked in 2025.
Equity trading posted $3.7 billion for the quarter, with prime brokerage—lending to hedge funds—driving incremental gains. That's a high-margin business tied to market activity levels rather than directional bets.
Capital Position Provides Flexibility
Common equity tier 1 capital sits at 15%, representing 300 basis points of excess over regulatory minimums. That buffer enables both growth investment and shareholder returns.
Morgan Stanley repurchased $1.5 billion of stock in Q4 and $4.6 billion for the full year. The board declared a quarterly dividend of $1.00 per share, payable February 13.
Management guided to a 22-23% tax rate for 2026—a slight increase from 2025 but still favorable by historical standards. Operating leverage should continue as the wealth platform scales without proportional expense growth.
IPO Pipeline Building
The earnings call highlighted improving conditions for equity capital markets. After a two-year IPO drought, Morgan Stanley sees momentum building.
"Strategic activity is accelerating," Pick said. "Companies and sponsors are looking to access capital for growth investments. The reopening of the IPO market creates additional opportunities."
That's important for 2026 forecasts. Investment banking fees can swing dramatically based on deal timing, and a strong IPO year would benefit Morgan Stanley disproportionately given its technology sector relationships.
What Separates the Two Models
Morgan Stanley and Goldman represent divergent strategies executed well.
Goldman doubled down on M&A advisory and trading, accepting earnings volatility in exchange for upside during active markets. The dividend hike and strong Q4 validate that approach for now.
Morgan Stanley built a recurring-revenue wealth business that dampens volatility and generates steadier capital returns. The record EPS and 21.6% return on equity validate that approach too.
Both strategies work when markets cooperate. The question is which one performs better when they don't. Morgan Stanley is betting that $9.3 trillion in sticky client assets provides downside protection Goldman lacks. The next downturn will test that theory.
For now, though, both banks enter 2026 with momentum. The earnings season for financials has been a clean sweep so far.