Morgan Stanley reported third-quarter results on Wednesday, October 14, before the market opened. Net revenues of $20.3 billion and earnings of $3.03 per share - up 12% and 8% from the year-ago quarter, and above analyst expectations. Net income reached $4.9 billion, and return on tangible common equity (ROTCE) was 22.6%, down from 23.5% a year earlier.
There may be errors or inaccuracies. Found something that looks wrong? Write to me and I will fix it.
What Was Reported
| Q3 2026 | Q3 2025 | Change | |
|---|---|---|---|
| Net revenues | 20,338 | 18,224 | +11.6% |
| Net interest income | 3,250 | 2,491 | +30.5% |
| Non-interest revenues | 17,088 | 15,733 | +8.6% |
| Non-interest expenses | 13,712 | 12,196 | +12.4% |
| Provision for credit losses | 148 | 0 | n/a |
| Pre-tax income | 6,478 | 6,028 | +7.5% |
| Net income | 4,909 | 4,610 | +6.5% |
| Diluted EPS (dollars) | 3.03 | 2.80 | +8.2% |
| Return on tangible common equity | 22.6% | 23.5% | -0.9 pts |
| Efficiency ratio | 67.4% | 66.9% | +0.5 pts |
| CET1 ratio | 14.9% | 15.1% | -0.2 pts |
In millions of dollars, except earnings per share and ratios. Net income is attributable to Morgan Stanley shareholders; capital ratios are estimates as of the release date. Source: the bank's earnings release and financial supplement, October 14, 2026.
Where the Money Was Made
Equity trading revenue jumped 41% to $5.80 billion, from $4.12 billion a year ago. Per the report, the strength came across all products and all regions, with Asia the standout. Against the second quarter, which was stronger, equity revenue fell 8%, from $6.30 billion.
On the other side, Fixed Income revenue fell 7% to $2.01 billion, from $2.17 billion, mainly in securitized products and commodities. Against the second quarter the decline was sharper: 18%, from $2.46 billion.
In investment banking, in the Institutional Securities segment, revenue rose 2% to $2.16 billion. Advisory revenue jumped 30% to $887 million, but equity underwriting fell to $525 million from $652 million a year ago, and fixed income underwriting to $747 million from $772 million. On the consolidated basis, which also includes Wealth Management and Investment Management, the line stands at $2.36 billion.
Wealth Management and Investment Management
Wealth Management posted record revenue: $9.07 billion, up 10%. Asset management revenue rose 16% to $5.54 billion, and the segment's net interest income rose 12% to $2.23 billion, down 1% from the second quarter. The segment's pre-tax income came to $2.75 billion, a 30.4% margin.
The segment's net new assets were $232.4 billion, versus $81.0 billion a year ago, and just over half were IPO-related. Fee-based flows: $80.5 billion versus $41.9 billion. Total client assets across Wealth Management and Investment Management stand at $10.5 trillion.
The comparison base in this segment changed: in the third quarter of 2025, Wealth Management revenue included $206 million of mark-to-market gains on hedges of the deferred compensation plan (DCP). From 2026 that item is no longer shown in net revenues, so the 10% increase is measured against a base that included it.
Investment Management was the weak side: revenue fell 12% to $1.46 billion, and assets under management stand at $2.05 trillion. Within that, performance-based income and other swung from a gain of $117 million a year ago to a loss of $106 million, following the reversal of accrued carried interest on one private fund.
Expenses and Credit
Non-interest expenses rose 12.4% to $13.7 billion, faster than revenue (11.6%). Compensation expense was $8.00 billion, versus $7.44 billion a year ago, and non-compensation expense jumped 20% to $5.72 billion, unchanged from the second quarter. The result: the efficiency ratio rose to 67.4% from 66.9%, and the pre-tax margin fell to 31.9% from 33.1%. Pre-tax income rose 7.5% to $6.48 billion, and the effective tax rate rose to 23.3% from 22.8%.
The provision for credit losses was $148 million, versus zero a year ago and $98 million in the second quarter: $141 million in Institutional Securities and $7 million in Wealth Management. Net charge-offs came to $106 million, of which $105 million were in Institutional Securities, on corporate and commercial real estate loans - which, per the report, had largely been provisioned for in prior quarters. The allowance for credit losses, including commitments, stands at $2.07 billion, versus $2.04 billion at the end of June.
Capital, Returns and Outlook
The CET1 ratio under the standardized approach stands at 14.9%, as in the second quarter and 0.2 percentage points below the level a year ago. Under the advanced approach the ratio is 16.3%, and the supplementary leverage ratio (SLR) is 4.8%.
The bank repurchased $1.54 billion of stock - about 7 million shares at an average price of $212.74. The declared dividend is $1.15 per share, payable on November 13 to shareholders of record on October 30.
The report contains no numerical guidance for net interest income or expenses. On the call with analysts, per a transcript published by Benzinga, CFO Sharon Yeshaya said that Wealth Management net interest income should rise modestly in the fourth quarter, subject to rates and client behavior, and that net interest income for the bank as a whole should grow over the coming year, mainly on loan growth. The fourth-quarter tax rate is expected to be slightly above 23.3%.
Chairman and CEO Ted Pick said in the earnings release: "We continue to invest for growth while delivering strong returns for shareholders." Per CNBC, he added on the call that he is cautiously optimistic about markets in the fourth quarter, that AI investment is set against geopolitical risk, and that activity slowed from early September.
Versus Expectations, and the Stock
Per CNBC, citing LSEG estimates, analysts expected earnings of $2.91 per share and revenue of $19.95 billion. The reported earnings of $3.03 are 4.1% above, and revenue of $20.34 billion is 2.0% above. Per StreetAccount figures cited there, equity trading was about $909 million above expectations, while Fixed Income was about $260 million below and investment banking about $110 million below.
The stock closed the report day at $181.60, down 2.70% from $186.64 the day before.
הזווית שלי
דעה אישית של אילן אברמוב - לא ייעוץ ולא המלצה
What stops me in this report is the gap between the revenue line and the profit line. Revenue rose 12%, pre-tax income 7.5%, and the pre-tax margin fell from 33.1% to 31.9%: every dollar of revenue left the bank with less profit than a year ago. To me that is the story of the quarter, more than the jump in equity trading.
There are two ways to read it. One: Wealth Management broke a record, with a 30.4% margin and $232 billion of net new assets, and it is an engine that rests on fees and not only on market conditions. Two: just over half of the flows are IPO-related, and the revenue growth came from equity trading, a line more sensitive to market conditions than fees, and Pick himself said activity slowed from early September. Both readings fit the same numbers, and what I will check next quarter is whether non-compensation expense, $5.7 billion in each of the last two quarters, keeps rising.
(To be clear: this is my personal opinion only. Nothing here is a recommendation to take any action, and there is no forecast here of the price of any security.)
Ilan Abramov, the author, or anyone on his behalf may hold some of the securities or funds mentioned in this article.
