What Morgan Stanley (MS) Said on Its Q3 Earnings Call

Key Points

• Morgan Stanley delivered strong third-quarter results, reporting $20.3 billion in revenue, $3.03 in EPS and a 22.6% return on tangible common equity—the fifth consecutive quarter above 20%.
• Wealth management reached record levels, with $9.1 billion in revenue, $232 billion in net new assets and total wealth and investment-management client assets rising nearly $400 billion to $10.5 trillion.
• Institutional Securities revenue rose 18% to $10 billion, led by a 41% increase in equity revenue, while management highlighted continued AI-related opportunities alongside risks from higher rates, geopolitical tensions and elevated asset valuations.

Morgan Stanley NYSE: MS reported third-quarter 2026 revenue of $20.3 billion, earnings per share of $3.03 and a return on tangible common equity of 22.6%, extending its streak of quarterly ROTCE above 20% to five quarters.

Chairman and Chief Executive Officer Ted Pick said the firm’s results reflected momentum across its integrated wealth, investment banking and markets businesses despite a more uncertain market environment late in the quarter. Total client assets in wealth and investment management rose by nearly $400 billion during the period to a record $10.5 trillion.

“Against a complicated backdrop, the quarter's overall performance speaks to the momentum of the integrated firm,” Pick said.

Wealth Management Sets Asset-Flow Records

Wealth management produced record revenue of $9.1 billion and pre-tax profit of $2.8 billion, resulting in a 30.4% pre-tax margin. The business generated $232 billion of net new assets and $80 billion of fee-based flows, both records, according to Executive Vice President and Chief Financial Officer Sharon Yeshaya.

For the first nine months of the year, Morgan Stanley generated roughly $500 billion in net new assets and approximately $175 billion in fee-based flows. Yeshaya said about half of the quarter’s fee-based flows came from a corporate retirement mandate.

IPO-related activity accounted for just over half of overall net new assets. Management said the firm expects such flows to fluctuate as IPO lockups expire, funds distribute holdings and clients use assets for consumption, but emphasized that its Workplace, self-directed and financial-advisor channels provide opportunities to retain and deepen client relationships.

Pick said Morgan Stanley has added more than $2 trillion in net new assets since acquiring E*TRADE and expanding its Workplace offering six years ago. The wealth platform had $8.4 trillion in client assets and served nearly 21 million relationships at the end of the quarter.

Bank lending balances increased by $5 billion sequentially, led by securities-based lending and mortgages. Deposits rose nearly $30 billion to $465 billion. Net interest income in wealth management was $2.2 billion, down modestly as deposits grew and mix shifted, though Yeshaya said the firm expects a modest increase in the fourth quarter, subject to interest rates and client behavior.

Management also said net interest income should expand in 2027, primarily supported by loan growth. Yeshaya said the bank’s deposit growth was an intentional strategic decision that should provide funding benefits over time, with effects expected to emerge during the following year.

Institutional Securities Revenue Rises 18%

Institutional Securities generated $10 billion in revenue, up 18% from a year earlier. Equity revenues rose 41% to $5.8 billion, driven by growth across products and Asia. Prime brokerage benefited from higher financing revenue on increased average client balances, while derivatives revenue rose on stronger early-quarter activity and risk management. Cash equities results also increased on higher client volumes across regions.

Fixed-income revenue was $2 billion, as lower structured activity in credit and commodities weighed on results. Macro revenue rose modestly, aided by foreign exchange, while securitized-products performance declined from the prior year.

Investment banking revenue totaled $2.2 billion, up 2% year over year. Advisory revenue of $887 million drove the increase, reflecting higher completed activity across most sectors. Equity underwriting revenue declined to $525 million compared with a strong prior-year period, while fixed-income underwriting remained strong at $747 million.

Yeshaya said banking pipelines remained “robust and diversified” across products, sectors and regions. She said AI-related activity has contributed to advisory and capital-markets momentum, though activity remains broad-based.

AI Investment Drives Opportunity, but Risks Remain

Pick described the third quarter as unfolding in two phases. July and August saw strong risk appetite tied to hyperscaler investment in AI infrastructure, while activity slowed following Labor Day amid renewed Middle East tensions and higher global interest rates.

He said the firm sees both supportive and cautionary forces entering the fourth quarter. On the positive side, Pick cited continued AI-related capital deployment, rising large-cap corporate earnings, full employment and what he described as a more constructive regulatory backdrop. Risks include persistent geopolitical conflicts, higher benchmark rates and energy prices, elevated asset prices and uncertain policy responses.

Addressing questions about AI capital expenditures, Pick said hyperscaler spending is running at roughly $1 trillion annually and could remain around that level over time, though the eventual pace remains uncertain. He said Morgan Stanley is “double overweight” on the AI opportunity, both in serving clients across the ecosystem and in deploying AI within its own operations.

Management said AI tools are being used to improve processes ranging from reconciliations and control-related work to sales tools in the equities business. Yeshaya said the firm expects technology spending to increasingly support productivity and revenue growth, with some investment reflecting a redistribution of spending toward AI capabilities.

Capital Position and Outlook

Morgan Stanley ended the quarter with a standardized CET1 ratio of 14.9% and approximately 300 basis points of excess CET1 capital, according to Pick. The firm repurchased $1.5 billion of common stock during the quarter. Standardized risk-weighted assets rose sequentially to $596 billion as the company supported markets clients and expanded corporate lending.

Institutional Securities provisions were $141 million, primarily reflecting portfolio growth. Net charge-offs totaled $105 million, mainly tied to certain corporate and commercial real estate loans that had largely been provisioned for in prior periods.

Yeshaya said the firm’s year-to-date efficiency ratio was 66%, with strong revenue generating operating leverage that more than offset elevated execution-related costs. The quarterly tax rate was 23.3%, and management expects the fourth-quarter rate to be slightly higher while maintaining its full-year guidance.

Looking ahead, Pick said Morgan Stanley intends to remain focused on advising clients through varying market conditions. He said corporate strategic dialogue remains active and that pent-up demand, capital-allocation needs and a more favorable regulatory setting could support investment banking activity, though higher rates and geopolitical uncertainty may affect the pace and structure of financings.

About Morgan Stanley (NYSE:MS)

Morgan Stanley is a global financial services firm serving corporations, governments, financial institutions, individuals and other investors. The company provides investment banking and advisory services, including mergers and acquisitions advice, equity and debt underwriting, securities sales and trading, and corporate lending.

Through its Wealth Management business, Morgan Stanley offers financial planning, brokerage, investment advisory and banking services to individual investors, businesses and institutions.

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