Morgan Stanley(MS) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In 2025, Morgan Stanley achieved record full-year revenues of $70.6 billion and fourth-quarter revenues of $17.9 billion, with a return on tangible common equity (ROTCE) of 21.6% and earnings per share (EPS) of $10.21 for the full year [17][18] - The efficiency ratio improved to 68.4% for the full year, indicating disciplined execution and prioritization of investments [17][55] - The firm generated record EPS of $2.68 for the fourth quarter, with a ROTCE of 21.8% [17][18] Business Line Data and Key Metrics Changes - Institutional Securities delivered record full-year revenues of $33.1 billion, including $7.9 billion in the fourth quarter, with investment banking revenues reaching $7.6 billion for the full year [18][19] - Wealth Management achieved full-year revenues of $31.8 billion and reported margins of 29%, with net new assets of $356 billion and fee-based flows of $160 billion for the year [20][24] - Investment Management generated total revenues of $6.5 billion, with assets under management (AUM) scaling to a record $1.9 trillion [24][25] Market Data and Key Metrics Changes - 25% of revenues came from outside the U.S., with EMEA growing revenues by 40% and Asia by 50% over the last two years [12] - The firm reported a strong macro backdrop, with improving corporate confidence and open capital markets positioning it well for future growth [18][19] Company Strategy and Development Direction - Morgan Stanley's strategy focuses on executing from a position of strength, with multi-year investments in core businesses and the integration of technology [4][8] - The firm aims to compound earnings in a capital-efficient way and is investing in AI tools to enhance efficiency and effectiveness across business units [8][56] - The company is committed to maintaining high standards for acquisitions, focusing on organic growth and client relationships [15][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the firm's ability to navigate macroeconomic and geopolitical uncertainties while continuing to execute on firm-wide goals [3][4] - The outlook for 2026 includes expectations for healthy investment banking pipelines and continued growth in wealth management and institutional securities [19][27] - Management emphasized the importance of compounding earnings through the cycle and maintaining a conservative approach to setting targets [30][39] Other Important Information - The firm raised its quarterly dividend to $1 per share, marking four consecutive years of dividend growth [15] - Morgan Stanley's CET1 ratio ended the year at 15%, with over 300 basis points of excess capital [14][26] Q&A Session Summary Question: Why no change for the targets despite strong results? - Management indicated that the decision to maintain targets reflects a desire to demonstrate the firm's ability to operate at high levels consistently and achieve higher lows during challenging periods [29][30] Question: What are the drivers of margin growth in wealth management? - Management highlighted the importance of scaling fee-based revenues and improving efficiency through technology investments as key drivers for margin expansion [32][34] Question: How does the firm view the trajectory of the wallet in institutional trading? - Management expressed optimism about the wallet's growth potential, citing ongoing share gains and favorable market conditions as supportive factors [42][47]