VALUATION HIGHLIGHTS

1. Institutional Securities (M&A Advisory, Equity Underwriting & Debt Origination, FICC Trading, Equity Trading, Principal Investments & Other) constitute 46% of the Trefis price estimate for Morgan Stanley's stock.
2. Wealth Management constitutes 46% of the Trefis price estimate for Morgan Stanley's stock.

WHAT HAS CHANGED?

Latest Earning

Morgan Stanley's Q3 2025 earnings were better than expected, with net income surging 45% from a year earlier to $4.61 billion, or $2.80 per share. Revenue rose 18% to $18.22 billion. The gains were fueled largely by its trading division, which has thrived amid heightened market volatility. Trading activity across Wall Street banks has picked up this year, as President Donald Trump’s trade policies have resulted in considerable turmoil in bond, currency, commodity, and equity markets.

POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE

Below are key drivers of Morgan Stanley's value that present opportunities for upside or downside to the current Trefis price estimate for the company's stock:

Equity Trading

• Equity Trading Assets: Morgan Stanley's equity trading operations are an important source of revenue. The bank's portfolio of equity trading assets was around $108 billion in 2021 and rose to about $117 billion by 2024. Going forward, we expect modest growth in trading assets to about $130 billion. However, the bank could be forced to scale back its equities business due to additional regulations and weak market conditions. Should this occur, and trading assets decline slightly to under $100 billion, there could be a downside of nearly 5% to the Trefis price estimate.
• Equity Trading Yield: Morgan Stanley's around 10.5% in 2024. We expect the yield to decrease to 10% by the end of the Trefis forecast period. However, if the metric grows to about 12%, there could be a 3% upside to our price estimate.

BUSINESS SUMMARY

Morgan Stanley is a global financial services firm that is engaged in four distinct business areas:

• Investment banking (M&A advisory, equity underwriting, debt origination)
• Sales & Trading (bonds, currencies, commodities, equities, derivatives)
• Wealth Management (high net worth individuals)
• Asset Management

SOURCES OF VALUE

Wealth Management is the most valuable business for Morgan Stanley. The key factors that make it more valuable than other businesses are:

Higher Revenues Compared to Any Other Business

As Morgan Stanley acquired Smith Barney from Citigroup in a phased manner and focused on growing its presence in the wealth management industry, the division witnessed a steady improvement in revenues. The segment revenues were $28.4 billion in 2024.

Steady Improvement In Operating Margins

Morgan Stanley's efforts to improve profitability for its wealth management division have seen profit margins climb to over 27% in 2024. Given the sheer size of revenues generated by the division, this translates into a significant (and stable) source of profits for Morgan Stanley.

KEY TRENDS

Increasing Demand for Investment Banking Services in Emerging Markets

With the GDP and per capita income of emerging markets such as China and India growing rapidly, there is an increasing demand for capital from companies in these markets to support the growing purchasing power of the people. Also, with the integration of these markets with the global economy, there is a shifting trend in these countries, from family-run businesses to corporations. As a result of these factors, an increasing number of companies in these markets are going public, leading to a growing demand for equity underwriting services. In addition, consolidation across different sectors is driving demand for M&A advisory services.

Volcker Rule to Affect Proprietary Trading Desks of Investment Banks

The Volcker Rule restricts banks from engaging in proprietary trading—making speculative investments for their own profit rather than on behalf of clients. Before the 2008 financial crisis, Morgan Stanley's proprietary trading desks contributed significantly to its earnings, but the rule effectively ended this revenue stream. While regulatory changes under the Trump and Biden administrations have adjusted compliance requirements, the core restrictions remain in place.

Steady Economic Growth Will Stimulate Asset & Wealth Management industry

Long-term trends, including the ongoing shift from state pension dependency to private retirement funding, aging populations in mature markets, and growing wealth in emerging economies, will positively impact assets under management.