[Management View]
Morgan Stanley reported $16.8 billion in revenue for Q2 2025, driven by improvements across Institutional Securities, Wealth Management, and Investment Management businesses. Earnings per share (EPS) were $2.13, marking six consecutive quarters of durable earnings growth. The firm achieved a return on tangible common equity (ROTCE) of 18.2% for the second quarter and 20.6% for the first half of 2025. Total client assets exceeded $8.2 trillion, moving closer to the firm's target of surpassing $10 trillion. Wealth Management pretax profit reached a record $2.2 billion at a 28.3% margin.

[Outlook]
Management expects steady net interest income levels given current policy rates and highlighted readiness for further capital deployment, including potential buybacks. The firm is focused on generating returns on incremental capital deployment and investing for growth across the integrated firm globally. Strategic clarity centers on ongoing investments in platform capabilities, disciplined capital deployment, and targeted inorganic opportunities judged by high strategic relevance.

[Financial Performance]
Morgan Stanley reported $16.8 billion in revenue for Q2 2025, with EPS of $2.13. Institutional Securities revenue was $7.6 billion, Investment Banking revenue was $1.5 billion, and Asset Management revenue was $1.6 billion, up 12% year over year. Bank lending balances increased sequentially to $169 billion, and total deposits were steady with net interest income of $1.9 billion. The firm's CET1 ratio was reported at 15%, over 200 basis points above the forward requirement.

[Q&A Highlights]
Question 1: How should we think about the incremental return on capital given changes in the regulatory backdrop and the integration of the franchise globally across businesses?
Answer: The business model is generating earnings growth and incremental excess capital, which continues to grow our flexibility. We are deploying additional capital into core businesses, such as investment banking, wealth management, and markets. Organic development is happening where there is operating leverage with smart risk architected deployment around clients. Inorganic opportunities are considered, but the bar is high for integration.

Question 2: Do you think the current tariff policy execution will impact corporate sentiment around deal activity?
Answer: If the cadence of tariff policy execution is within broadly expected parameters, it will be a catalyst for further clearing of uncertainty. Strategic activity has started to pick up, and there is real interest on the buy side from both corporates and strategics. The IPO market is working well, indicating a strong second half going into 2026.

Question 3: Could you talk about the factors that would lead to completing an inorganic transaction?
Answer: It has to fit squarely within the strategy to raise, manage, allocate capital for clients. The opportunity set within Morgan Stanley is extraordinary, and we are seeing growth across wealth management, investment management, and the investment banking franchise. Tuck-ins that add to operating leverage without distracting from the core strategy are considered.

Question 4: Can you expand upon your comments around net new assets (NNA) and the recruiting backdrop for new advisers joining the platform?
Answer: Recruiting is strong across all three channels: adviser-led, workplace, and self-directed. Net new assets are originating from workplace and becoming fee-based flows. Investments in marketing and business development are paying off, and the funnel is working well.

Question 5: How are you thinking about the opportunity from Stablecoins and tokenization?
Answer: We are actively discussing the landscape and potential uses for our client base. It is early to tell how Stablecoin would play in, but we are close to the landscape and understanding the evolution across technological advancements.

Question 6: Can you provide more flavor around the trading environment and efforts to improve market share?
Answer: We have been actively investing in the global franchise, and results are bearing out in equities and fixed income. Client repositioning and momentum were strong across institutional and retail businesses. The integrated firm is knitting clients together globally, providing access to capital, ideas, financing, and strategy.

Question 7: Why is asset management not included in the potential deployment of capital?
Answer: The opportunities across investment management are significant, and there are many acquisition opportunities. We are focused on nurturing the core strategy and generating real returns and incremental capital for shareholders.

Question 8: How should we think about net interest income (NII) in a forward curve setting with expected rate cuts?
Answer: Generally, in a lower rate environment, we see inflows of sweeps. Lending balances are increasing, indicating strength in the business. Specific guidance is not provided, but we expect NII to remain around recent levels, subject to changes in the policy rate.

Question 9: How do you see the trend of more lending through the capital markets division?
Answer: Regulatory reform may normalize, allowing highly capitalized global investment banks to get back core share around corporate product. The ability to prosecute core lending product with sophisticated clients will increase, and we intend to compete for additional depth with key ecosystem players.

Question 10: Where do deposits fall on your priority list for inorganic opportunities?
Answer: Deposits are a strategic objective, and we see potential growth in eligible assets that we could put on the bank. We have grown and diversified our deposit base, supporting ongoing growth of eligible assets.

[Sentiment Analysis]
Analysts and management displayed a positive and constructive tone throughout the call. Analysts were focused on understanding the incremental return on capital and the impact of regulatory changes. Management emphasized strategic clarity, readiness for capital deployment, and ongoing investments in platform capabilities.

[Quarterly Comparison]
| Metric | Q2 2025 | Q1 2025 | YoY Change |
|---------------------------------|---------------|---------------|---------------|
| Revenue | $16.8 billion | $17.7 billion | +5% |
| EPS | $2.13 | $2.60 | +3% |
| ROTCE | 18.2% | 20.6% | +2% |
| Institutional Securities Revenue| $7.6 billion | $8.1 billion | +6% |
| Investment Banking Revenue | $1.5 billion | $1.6 billion | +4% |
| Asset Management Revenue | $1.6 billion | $1.7 billion | +12% |
| Bank Lending Balances | $169 billion | $160 billion | +5% |
| Total Deposits | $383 billion | $380 billion | +1% |
| CET1 Ratio | 15% | 14.8% | +0.2% |

[Risks and Concerns]
Management highlighted potential risks related to regulatory changes, market volatility, and geopolitical uncertainty. The firm is focused on prudent capital deployment and risk management to navigate these challenges.

[Final Takeaway]
Morgan Stanley delivered strong Q2 2025 performance, driven by record client assets and strategic capital deployment. The firm is focused on generating returns on incremental capital and investing for growth across the integrated firm globally. Management expects steady net interest income levels and highlighted readiness for further capital deployment, including potential buybacks. Analysts and management displayed a positive and constructive tone throughout the call, emphasizing strategic clarity and ongoing investments in platform capabilities.