Morgan Stanley beats consensus, defends keeping older goals

• Key insight: Morgan Stanley, which reported a solid fourth quarter and a strong 2025 overall, left its financial targets as is.
  
• Expert quote: "We are going to not push on robust objectives, when in fact 20% returns are pretty darn good." — CEO Ted Pick
  
• Forward look: During the fourth quarter, the investment banking giant got closer to its target of securing at least $10 trillion in firmwide client assets.

Morgan Stanley reported an earnings beat for the fourth quarter, reflecting a surge in investment banking revenues spurred by an uptick in client activity related to merger-and-acquisition deals.

On Thursday, the Wall Street giant reported net income of $4.4 billion, up 18% year over year.

Earnings per diluted share totaled $2.68. Analysts polled by S&P Capital IQ had predicted $2.45.

Firmwide net revenues rose 10% from the year-ago quarter to $17.9 billion. Investment banking revenues climbed 44% during the same period, offsetting declines in trading and "other" revenues. Asset management revenues, along with commissions and fees, rose 12% year over year.

For all of 2025, Morgan Stanley's revenues totaled $70.6 billion, up 14% year over year.

Ted Pick, who completed his second year as Morgan Stanley's CEO on Jan. 1, said in a press release that the bank "delivered outstanding performance in 2025" and that its results demonstrate "multi-year investments, which have contributed to growth and momentum across the integrated firm."

Pick has focused much of his time as CEO on building the "integrated firm" that he described in early 2024. On Thursday, the bank reaffirmed the financial targets it set after Pick's promotion, including the firmwide goal of securing at least $10 trillion of client assets and achieving an efficiency ratio of 70%.

During a morning conference call, one analyst wanted to know why the bank didn't increase its targets, given its strong performance. Pick defended the bank's decision, saying management "had a robust conversation" about it, but ultimately chose to leave the goals unchanged for now.

"I think the tendency has been, when a target is hit … let's take it up further," Pick said. "But I think part of the premise of rigor and humility at our place is, we do this in a way where we compound earnings again and again right through the cycle."

He acknowledged that some of the 2-year-old targets were reached last year. For all of 2025 and for the fourth quarter specifically, Morgan Stanley's efficiency ratio was 68%, which beat the stated goal of 70%.

The return on tangible common equity was 21.6% for the full year and 21.8% between Oct. 1 and Dec. 31. The Wall Street bank's stated goal for the profitability metric remains 20%.

Also during the fourth quarter, Morgan Stanley moved closer to its goal of securing at least $10 trillion in client assets. By the end of December, client assets had reached $9.3 trillion, helped in part by the addition of more than $350 billion in net new assets, the bank said. 

In 2020, clients assets were $4.8 billion.

In response to another question about leaving the targets alone, Pick reiterated his stance.

"It's just not in our prudent kind of long-term thinking … that we should move the targets higher because we've had a couple good years," he said. "We are going to not push on robust objectives, when in fact 20% returns are pretty darn good if we're continuing to gain wallet, and secure market share."

During the fourth quarter, Morgan Stanley's noninterest expenses were $12.1 billion, up 8% from the same quarter in 2024. Of that total, $7.1 billion was classified as compensation and benefits, an increase of 12% year over year.

Noncompensation-related costs, such as marketing spending, occupancy costs, brokerage fees and professional services, rose 3% to just over $5 billion.

During the quarter, the bank repurchased $1.5 billion of its outstanding common stock, it said.