Which Wall Street Titan Is Doing Better: Morgan Stanley Or Goldman Sachs?

by Trefis Team
Morgan Stanley
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Morgan Stanley (NYSE:MS) and Goldman Sachs (NYSE:GS) are both global financial services firms that offer services like Investment Banking, Sales & Trading, Investment Management & Wealth Management to corporate, financial institutions, government and high-net worth individuals. Their business model faces stiff challenges and competition from offerings by competitors including JPMorgan, Bank of America, Citigroup and Wells Fargo.

Trefis compares trends in key operating metrics for Morgan Stanley vs Goldman Sachs over the last 4 years, along with our forecast for 2019 in an interactive dashboard, and finds that Goldman Sachs runs a more profitable business than its peer despite having lower revenues. The reason for this is that Goldman is highly dependent on its Investment Banking and Securities Trading segments, while Morgan Stanley is more reliant on its Wealth & Asset Management business. In other words, Morgan Stanley has chosen to sacrifice some of its profitability to increase the proportion of stable revenue streams in its business model

Trefis estimates Morgan Stanley’s valuation to be $54 per share, which is roughly 30% higher than the current market price. Additionally, you can see more Trefis data for financial companies here.

Morgan Stanley is heavily dependent on Asset & Wealth Management, whereas Goldman Sachs derives the largest chunk of its revenues from Securities Trading

Note: For ease of comparison, we have combined Morgan Stanley’s Investment Management and Wealth Management segments under “Asset & Wealth Management”.

  • Although Morgan Stanley’s revenues dropped by 1.5% in 2016, it grew at an average annual rate of 7.6% over the next two years to reach $40.1 billion in 2018. Further, it is expected to record a marginal decrease in 2019 driven by lower investment banking revenues and decline in securities trading, partially offset by growth in asset & wealth management business.
  • Goldman Sachs’ revenues dropped by 9.5% in 2016, before improving at an average annual rate of 9.4% over the next two years to reach $36.6 billion in 2018. However, we expect it to report a drop of 3.4% in 2019 mainly driven by lower securities trading revenues.
  • Morgan Stanley grew at a higher pace over 2016-2017; however Goldman surpassed it in 2018 with 11.9% y-o-y growth rate.
  • Asset & Wealth Management is the highest revenue contributor for Morgan Stanley with around 50% revenue share over the last four years, followed by Securities Trading with more than 34% share.
  • Goldman Sachs earns a bulk of its revenues from its Securities Trading operations – more than 36% over the last 4 years, followed by Investment Banking.
  • Due to the negative trading scenario and lower consumer activity, market-dependent revenues would suffer the most in 2019. As Goldman is more dependent on Securities Trading & Investment Banking revenues among the two banks, it is expected to witness a higher revenue drop.

Goldman Sachs’ operating margin was notably higher than Morgan Stanley’s in 2018

  • Although Morgan Stanley has consistently improved its operating margin from 24.2% in 2015 to 28% in 2018, Goldman reported a higher margin figure than Morgan Stanley for each year over 2015-2018.

Goldman is the market leader in the investment banking space

  • Goldman reported revenues of $7.9 billion in 2018 which was 29% higher than the figure for Morgan Stanley
  • Morgan Stanley’s investment Banking revenues have grown at an average annual rate of 7.7% over the last 4 years, while Goldman’s IB revenues have grown at an average rate of 4.5% over the same period.

Morgan Stanley’s Securities Trading desks have generated more revenues than Goldman’s over recent years

  • Goldman Sachs’ total revenues are highly dependent on its securities trading operations. While Goldman’s securities trading revenues have fluctuated over the last 4 years. Morgan Stanley’s revenues have remained quite stable because of the latter’s focus on equity trading.
  • Notably, the average annual growth rate in these revenues over the last four years was -3% for Goldman and 2.4% for Morgan Stanley

Morgan Stanley’s Asset & Wealth Management revenues are 3x Goldman’s revenues from these operations

  • Also, Morgan Stanley has reported a higher operating margin for the segment compared to Goldman in each of the last 3 years.
  • Morgan Stanley’s asset & wealth management operations are, hence, much bigger and more profitable than Goldman.

Other Key Operating Metrics

  • Morgan Stanley has a bigger asset & wealth management unit, which is the main reason behind its higher employee count. It reported 60.3K employees in 2018 which was 65% higher than Goldman’s figure.
  • As Goldman has a significantly lower employee count, its revenue per employee figure of $1 million in 2018 was 51% higher than its peer’s.
  • Although revenue per employee figure for Goldman is notably higher than that for Morgan Stanley, the difference is not that big in terms of compensation per employee.
  • Goldman reported per employee compensation of $337K in 2018, which was 15% higher than that for Morgan Stanley.

Additionally, a detailed comparison of metrics like CET1 capital ratio, asset turnover ratio and return on assets for Morgan Stanley vs Goldman Sachs is available in our interactive dashboard.


  • Although Morgan Stanley has higher total revenues, Goldman is not far behind.
  • Goldman is highly dependent on Investment Banking & Securities Trading segments, whereas Morgan Stanley is more reliant on its Wealth & Asset Management business.
  • The Wealth & Asset Management business is a potential growth area for Goldman
  • Goldman Sachs has a higher return on assets than that of its peer. However, Morgan Stanley has reported a higher CET1 capital ratio and a better asset turnover ratio over the last 4 years.
  • Overall, Goldman Sachs’ has a better operating margin than Morgan Stanley. Hence, its operations are more efficient.

Per Trefis, Morgan Stanley’s Revenues (shows key revenue components) are expected to cross $40 billion in 2019 – leading to an EPS of $4.89 for the year. This EPS figure coupled with a P/E multiple of 11x, works out to a price estimate of $54 for Morgan Stanley’s stock (shows cash and valuation analysis), which is roughly 30% higher than the current market price.

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