Morgan Stanley Tops Q1 Earnings Estimates on Solid IB & NII, Stock Up

Morgan Stanley’s (MS Quick QuoteMS – Free Report) first-quarter 2025 earnings of $2.60 per share handily outpaced the Zacks Consensus Estimate of $2.23. The bottom line also rose 28.7% from the prior-year quarter.

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MS shares rose almost 1.5% in pre-market trading on bumper deal-making activities and net interest income (NII), which majorly supported its quarterly performance.

Behind Morgan Stanley’s Headline Numbers

Like its Wall Street peers, Morgan Stanley’s investment banking (IB) business performance was solid. Advisory fees grew 22.1% year over year. Further, underwriting fees witnessed decent momentum in the quarter. Specifically, fixed-income underwriting income increased 21.8% while equity underwriting income declined 25.8%. So, total IB fees (in the Institutional Securities division) grew 7.7% to $1.56 billion. We had projected it to be $1.73 billion.

The company also posted a solid trading performance. Equity trading revenues increased 45.2% year over year to $4.13 billion and fixed-income trading income was up 4.8% to $2.6 billion. Our projections for equity and fixed-income trading revenues were $3.14 billion and $2.46 billion, respectively.

Further, wealth management business performance was solid. The company’s NII increased, given higher lending activities and yields on the investment portfolio, partially offset by lower average sweep deposits. However, an increase in total non-interest expenses and provisions were headwinds.

Net income applicable to common shareholders was $4.16 billion, up 27.3% from the year-ago quarter. Our estimate for the metric was $3.54 billion.

Morgan Stanley’s Revenues Jump, Expenses Rise

Quarterly net revenues were $17.74 billion, up 17.2% from the prior year quarter. The top line handily beat the Zacks Consensus Estimate of $16.64 billion.

NII was $2.35 billion, up 31%. We had projected NII of $2.36 billion.

Total non-interest revenues of $15.39 billion rose 15.3%. Our estimate for the metric was $14.02 billion.

Total non-interest expenses were $12.06 billion, up 12.2%. Our estimate for the metric was $11.47 billion.

Provision for credit losses was $135 million in contrast to a provision benefit of $6 million in the prior-year quarter. We had projected the metric to be $52.8 million.

MS’ Segment Performance

Institutional Securities: Pre-tax income was $3.28 billion, surging 39.6% from the prior-year quarter. Our estimate for the same was $2.47 billion.

Net revenues were $8.98 billion, up 28% year over year. The upside resulted from increased advisory fees, underwriting income and trading revenues. We had projected revenues of $7.61 billion.

Wealth Management: Pre-tax income totaled $1.95 billion, up 8% year over year. Our estimate for the metric was $2.07 billion.

Net revenues were $7.33 billion, up 6.5%, driven by higher asset management revenues and NII. We had projected revenues of $7.37 billion.

Total client assets were $6.02 trillion as of March 31, 2025, up 9.5% year over year. We had projected the metric to be $6 trillion.

Investment Management: Pre-tax income was $323 million, up 34% from the year-ago quarter. Our estimate for the same was $318.6 million.

Net revenues were $1.6 billion, up 16.3%. The improvement was attributable to a rise in asset management and related fees, and performance-based income and other revenues. We had projected revenues of $1.56 billion.

As of March 31, 2025, total assets under management or supervision were $1.65 trillion, up 9.4% year over year. Our estimate for the metric was $1.67 trillion.

Morgan Stanley’s Capital Position Solid

As of March 31, 2025, book value per share was $60.41, up from $55.60 in the corresponding period of 2024. The tangible book value per share was $46.08, up from $41.07 as of March 31, 2024.

Morgan Stanley’s Tier 1 capital ratio (advanced approach) was 17.7% compared with 17.3% in the year-ago quarter. The common equity Tier 1 capital ratio was 15.7%, up from 15.4% a year ago.

Update on Morgan Stanley’s Share Repurchases

In the reported quarter, Morgan Stanley repurchased 8 million shares for $1 billion.

Our Viewpoint on MS

The rebound of the IB business and a solid deal-making pipeline are expected to support Morgan Stanley’s financials. Also, the company’s efforts to become less dependent on capital market-driven revenues, its inorganic expansion/strategic alliance and relatively high rates will support top-line growth. However, elevated expenses due to expansion efforts and volatile trading revenues are concerns.

Currently, Morgan Stanley carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings Release Dates of Other Investment Banks

Goldman Sachs (GS Quick QuoteGS – Free Report) is scheduled to report quarterly results on April 14. The Zacks Consensus Estimate for GS’ first-quarter earnings has been revised marginally downward over the past seven days.

Raymond James Financial Inc. (RJF Quick QuoteRJF – Free Report) is slated to report quarterly results on April 23. The Zacks Consensus Estimate for RJF’s fiscal second-quarter earnings has been revised 3.2% downward over the past seven days.