Morgan Stanley NYSE: MS reported what executives described as a “record quarter” to start 2026, posting revenues of $20.6 billion and earnings per share (EPS) of $3.43, as clients stayed active amid geopolitical uncertainty and increased market volatility.
Chairman and CEO Ted Pick said the quarter reflected the benefits of the firm’s integrated model across wealth, asset management, and investment banking and trading. “Amidst increased geopolitical uncertainty, the firm generated a record quarter with revenues of $20.6 billion and EPS of $3.43,” Pick said, adding that the firm delivered a 27% return on tangible common equity (ROTCE). Pick also highlighted that total client assets across Wealth and Investment Management exceeded $9 trillion, “on the road to $10 trillion plus.”
Quarterly performance and firmwide metrics
Chief Financial Officer Sharon Yeshaya said Morgan Stanley produced record revenues and “record EPS ex-CVA of $3.43,” with ROTCE of 27.1%. The firm’s efficiency ratio was 65%, which Yeshaya said reflected operating leverage and disciplined execution “as we continue to invest strategically across the firm.” She noted the quarter included $178 million of severance charges.
On capital, Pick said the firm ended the quarter with a reported CET1 ratio of 15.1% versus a 11.8% requirement, representing “a capital buffer of over 300 basis points.” Yeshaya said Morgan Stanley bought back $1.75 billion of common stock during the period. She also said the quarter’s tax rate was 19.6%, driven by share-based award conversions that largely occur in the first quarter, while maintaining the firm’s expectation for a 2026 tax rate of 22% to 23% with quarterly volatility.
Institutional Securities: record quarter led by equities and fixed income
Institutional Securities delivered record revenues of $10.7 billion, with Yeshaya citing strength “across asset classes in both banking and markets, and in all regions.” She said AI-related themes and geopolitical uncertainty helped drive client engagement during the quarter.
Investment Banking revenues rose year over year to $2.1 billion. Yeshaya said advisory revenues of $978 million increased 74% from the prior year due to higher completed activity in the Americas and noted that M&A “broadened across sectors, with notable strength in technology and industrials.” Equity underwriting revenues were $396 million, “led by higher issuance across IPOs and convertibles,” while fixed income underwriting revenues were $742 million, with outperformance driven by “record issuance in the investment-grade market” tied to higher event-driven activity. Yeshaya said Investment Banking pipelines “remain steady.”
Equity revenues reached $5.1 billion, the first time the firm surpassed the $5 billion level, supported by strong client activity across businesses and regions. Yeshaya said prime brokerage revenues increased year over year, driven by higher average balances that outperformed market indices, “particularly in Asia.” She also cited higher cash volumes across regions and stronger derivative results driven by robust client activity.
Fixed income revenues were a “post-crisis record” at $3.4 billion. Yeshaya said securitized products and credit corporates contributed to stronger “micro” results, while “macro” results were solid but reflected declines in foreign exchange compared with a more favorable trading environment last year. She said commodities revenues increased significantly as the business navigated elevated volatility in energy markets, benefiting from increased flow and structured client activity.
Wealth Management: record revenue, strong flows, and lending growth
Morgan Stanley’s Wealth Management business posted record revenues of $8.5 billion and a pre-tax margin of 30.4%. Yeshaya emphasized continued client engagement and highlighted $118 billion of net new assets (NNA) and $54 billion of fee-based flows. “We are setting the industry standard in fee-based flows, generating $54 billion this quarter,” she said, calling it a record excluding prior acquisitions.
Asset management revenues within Wealth rose year over year to $5.1 billion, which Yeshaya attributed to higher market levels and sustained fee-based flows. Transactional revenues were $1.1 billion, and daily average trades were the second highest level on record as clients remained active in volatile markets. Yeshaya also pointed to record sales in the firm’s diversified alternative offerings, led by growth in private equity and real assets.
Bank lending balances increased by $5 billion sequentially to $186 billion, driven by securities-based lending and steady mortgage growth. Household penetration of lending products reached 18%, up from 14% five years ago. Deposits grew sequentially to $419 billion, and net interest income (NII) increased to $2.2 billion. Yeshaya said NII growth reflected higher lending balances and higher average sweeps that more than offset the impact of two rate cuts in the fourth quarter. Looking ahead, she said the firm expects NII to “build over the course of the year with a modest increase in the second quarter compared to the first.”
In response to questions about organic growth, Yeshaya said the quarter’s NNA did not hinge on one driver, but she highlighted Workplace as an increasingly meaningful contributor. She said the first quarter included vesting activity and that Morgan Stanley saw “greater retention of the assets that vested,” translating into higher NNA and supporting longer-term “channel migration” into advice.
Addressing Wealth profitability, Yeshaya reaffirmed the firm’s Wealth margin target of 30%, saying the firm is prioritizing investment rather than managing margin quarter by quarter. “Over time, we’ll continue to move up the margin on its own organically,” she said, while emphasizing continued investment to serve clients and advisors.
Investment Management flows and strategic initiatives
Investment Management revenues were $1.5 billion. Yeshaya said asset management and related fees increased 3% year over year due to higher AUM, offset by declines in accrued carried interest in private funds. Long-term net flows were $3.3 billion, driven by demand for Parametric solutions and fixed income strategies, which she said helped offset equity flows. Total AUM was $1.9 trillion.
Pick and Yeshaya also discussed strategic initiatives and market themes, including AI and private markets. Pick said the firm closed its acquisition of EquityZen during the quarter and characterized 2026 as a period defined by “known unknowns,” including the adoption of AI and ongoing conflict in the Middle East. Yeshaya said Morgan Stanley launched a digital asset pilot with Zerohash, allowing select clients to buy and sell “several major digital currencies” through E*TRADE.
On AI, Pick said, “AI is our friend,” describing it as the next major technology wave and noting the firm is working with “Claude Mythos, the beta version,” with a focus on both efficiency and productivity, while maintaining cybersecurity as a top priority.
When asked about private credit, Pick said the asset class is “having a learning moment,” while emphasizing that Morgan Stanley’s exposures are modest. He said alternatives represent about 5% of total financial-advisor-facing Wealth assets, with private credit at about 1%, and that private credit is “less than 1%” of Investment Management AUM, “well under $20 billion of $1.9 trillion.” Pick said he has observed “more balance in the conversation” around private credit and argued credit performance should broadly track the economy’s health.
On regulatory developments, Yeshaya discussed proposed changes spanning models, Basel, and G-SIB calculations. She said under the proposed G-SIB framework, the firm’s buffer would have moved from 3.5% at the end of the fourth quarter to 2.2%, though she also noted potential RWA inflation associated with Basel. She said that taken together, Morgan Stanley expects to be “capital neutral to modestly positive” versus current levels, depending on final outcomes.
Pick said the firm hopes to work with regulators to finalize Basel rules, calling it “absolutely critical that we keep the momentum going and we land this.”
About Morgan Stanley NYSE: MS
Morgan Stanley NYSE: MS is a global financial services firm headquartered in New York City. Founded in 1935 by Henry S. Morgan and Harold Stanley, the company provides a broad range of investment banking, securities, wealth management and investment management services to corporations, governments, institutions and individual investors. Leadership has been guided by a senior executive team and board of directors; James P. Gorman has served as the company's chief executive and chairman in recent years.
The firm's primary business activities are organized around three principal businesses: Institutional Securities, Wealth Management and Investment Management.
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