Form 10-Q Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

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

The company continued to maintain a strong capital position, with a Standardized Common Equity Tier 1 capital ratio of 15.3% as of March 31, 2025. Morgan Stanley also accreted $1.9 billion of Common Equity Tier 1 capital during the quarter.

Overview of Financial Results

Morgan Stanley reported net revenues of $17.7 billion in the first quarter of 2025, a 17% increase compared to the same period in the prior year. Net income applicable to the company was $4.3 billion, up 26% from the prior year quarter. Diluted earnings per common share increased by 29% to $2.60.

The firm’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. This was primarily due to higher revenues, which outpaced the increase in non-interest expenses.

Consolidated Results—Three Months Ended March 31, 2025

• Net revenues were $17.7 billion, up 17% from the prior year quarter.
• Net income applicable to Morgan Stanley was $4.3 billion, up 26% from the prior year quarter.
• Diluted earnings per common share was $2.60, up 29% from the prior year quarter.
• ROE was 17.4% and ROTCE was 23.0%.
• The expense efficiency ratio was 68%, down from 71% in the prior year quarter.
• The firm accreted $1.9 billion of Common Equity Tier 1 capital, and the Standardized Common Equity Tier 1 capital ratio was 15.3% as of March 31, 2025.

Business Segment Results

Institutional Securities

• Net revenues were $8.98 billion, up 28% from the prior year quarter, driven by higher results in Equity and gains on the sale of corporate loans.
• Pre-tax margin was 37%, up from 34% in the prior year quarter.

Wealth Management

• Net revenues were $7.33 billion, up 6% from the prior year quarter, primarily reflecting higher asset management revenues.
• Pre-tax margin was 26.6%, up from 26.0% in the prior year quarter.

Investment Management

• Net revenues were $1.60 billion, up 16% from the prior year quarter, driven by higher asset management fees and performance-based income.
• Pre-tax margin was 20%, up from 18% in the prior year quarter.

Strengths and Weaknesses

Morgan Stanley’s strong financial performance in the first quarter of 2025 highlights several key strengths of the firm:

Strengths:

• Diversified business model: Morgan Stanley’s three main business segments – Institutional Securities, Wealth Management, and Investment Management – all contributed to the firm’s overall success, demonstrating the benefits of its diversified operations.
• Robust revenue growth: The company was able to grow its net revenues by 17% year-over-year, driven by strong performance across its business lines.
• Improved profitability: The firm’s ROE and ROTCE improved significantly compared to the prior year quarter, indicating its ability to generate solid returns for shareholders.
• Disciplined expense management: Morgan Stanley’s expense efficiency ratio improved, reflecting the company’s focus on controlling costs while driving revenue growth.
• Strong capital position: The firm’s Standardized Common Equity Tier 1 capital ratio of 15.3% as of March 31, 2025 demonstrates its financial strength and ability to withstand potential economic challenges.

Weaknesses:

• Potential impact of economic conditions: The report notes that the economic environment, client and investor confidence, and overall market sentiment deteriorated in 2025, which could continue to impact capital markets and the company’s businesses going forward.
• Uncertainty around global trade policies: Recent developments around global trade policies have the potential to adversely impact Morgan Stanley’s credit portfolios, though the magnitude of such impacts remains uncertain.
• Reliance on market-sensitive revenue streams: A significant portion of the firm’s revenues, particularly in the Institutional Securities segment, are derived from market-sensitive activities such as trading and investment banking, which can be volatile and subject to economic conditions.

Outlook and Future Considerations

Morgan Stanley’s strong performance in the first quarter of 2025 suggests that the firm is well-positioned to navigate the current economic and market environment. However, the report highlights several factors that could continue to impact the company’s future results:

Economic and Market Conditions: The report notes that 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, which could continue to affect capital markets and the company’s businesses.

Regulatory and Competitive Landscape: The financial services industry is subject to a complex and evolving regulatory framework, which can impact Morgan Stanley’s operations and profitability. Additionally, the company faces intense competition from other global financial institutions, which could pressure margins and market share in certain business lines.

Diversification and Risk Management: While Morgan Stanley’s diversified business model is a key strength, the firm must continue to carefully manage risks across its various operations. Effective risk management, including credit risk, market risk, and operational risk, will be crucial in navigating the challenging economic and market environment.

Technological Advancements and Innovation: The financial services industry is undergoing rapid technological change, with the emergence of new digital platforms, fintech solutions, and evolving client preferences. Morgan Stanley will need to invest in technology and innovation to remain competitive and meet the evolving needs of its clients.

Overall, Morgan Stanley’s strong first-quarter performance demonstrates the firm’s ability to deliver solid results even in a challenging economic environment. However, the company must remain vigilant in managing the various risks and uncertainties that could impact its future performance. By continuing to execute its diversified business strategy, maintaining a strong capital position, and investing in technology and innovation, Morgan Stanley is well-positioned to navigate the road ahead and create long-term value for its shareholders.