Morgan Stanley beats Q2 forecasts, investment banking performance drags
By Josh White
Date: Wednesday 16 Jul 2025
(Sharecast News) - Morgan Stanley reported second-quarter earnings that exceeded Wall Street expectations on Wednesday, boosted by strong trading activity and continued growth in its wealth management division.
However, a weaker performance in investment banking and a sharp rise in credit provisions weighed on investor sentiment, sending shares lower.
The bank posted net revenue of $16.8bn, up nearly 12% from $15bn a year earlier and ahead of analysts' forecasts of $16.07bn.
Net income rose to $3.5bn, or $2.13 per share, compared to $3.1bn, or $1.82 per share, in the second quarter of 2024.
Analysts surveyed by LSEG had expected earnings of $1.96 per share.
"Morgan Stanley delivered another strong quarter," said chairman and CEO Ted Pick.
"Six sequential quarters of consistent earnings ... reflect higher levels of performance in different market environments."
The institutional securities unit generated $7.6bn in revenue, up from $7bn a year earlier, driven by a 23% jump in equities trading and a 9% rise in fixed-income revenues amid heightened market volatility triggered by US tariff announcements.
However, investment banking revenues fell 5% as a drop in merger and acquisition advisory fees offset gains in equity underwriting, including high-profile IPOs such as fintech firm Chime and Hinge Health.
Wealth management revenue rose 14% year-on-year to $7.8bn, benefiting from increased client activity and higher asset management fees.
The business added $59bn in net new assets and recorded $43bn in fee-based flows during the quarter, helping push total client assets across wealth and investment management to a record $8.2trn.
Investment management contributed $1.6bn in revenue, supported by higher average assets under management and $11bn in positive long-term net flows.
Despite the strong results, investors reacted to a steep rise in provisions for credit losses, which increased to $196m from $76m a year ago, and continued underperformance in investment banking relative to peers.
Looking ahead, executives expressed optimism about a recovery in capital markets activity, noting increased client engagement in the latter half of the quarter.
CFO Sharon Yeshaya said merger discussions were "active again" as companies looked beyond near-term trade risks.
Morgan Stanley also announced a 33% increase in its quarterly dividend to $1.00 per share and reiterated its commitment to maintaining flexibility in capital deployment.
At 1219 EDT (1719 BST), shares in Morgan Stanley were down 3.14% in New York, at $137.15.
Reporting by Josh White for Sharecast.com.
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