Morgan Stanley beats profit estimates on dealmaking windfall

Jan 15 (Reuters) – Morgan Stanley‘s profit beat analysts’ expectations in the fourth quarter, fueled by a 47% jump in investment banking revenue as dealmaking surged and debt underwriting fees nearly doubled.

A flurry of large transactions propelled global mergers and acquisitions past $5.1 trillion last year as exuberance over AI and rate cuts by the Federal Reserve encouraged CEOs to pursue buyouts.

Morgan Stanley’s investment banking revenue rose to $2.41 billion in the quarter from $1.64 billion, a year earlier.

Equity markets surged to record highs late last year despite volatility in the first half from U.S. President Donald Trump’s tariff policies.

“We are seeing an accelerating pipeline in M&A and IPOs… We expect more deals in healthcare, industrials. Sponsors are also increasing activity because they have the dual track alternative now, either selling through an M&A transaction or an IPO,” Morgan Stanley CFO Sharon Yeshaya told Reuters.

The bank posted a profit of $2.68 per share in the quarter, compared with Wall Street expectations of $2.44, according to estimates compiled by LSEG.

Total annual revenue surged to a record high of $70.65 billion.

Shares of the bank rose marginally in premarket trading. They had gained about 41% in 2025, outpacing the benchmark S&P 500 but lagging rival Goldman Sachs.

The earnings mirror those of Wall Street rivals including Citigroup, which benefited from a surge in M&As and initial public offerings (IPOs).

ADVISOR TO BIG IPOs

Despite a bumper IPO market being disrupted by the longest-ever U.S. government shutdown late last year, soaring valuations and falling interest rates emboldened companies to pursue follow-on equity offerings and convertible bond deals.

The bank’s institutional securities business, which houses its Wall Street operations, posted $7.93 billion in revenue in the quarter. Analysts, on average, were expecting revenue of $7.89 billion for the segment.

Morgan Stanley’s debt underwriting revenue surged nearly 93% to $785 million, driven by higher issuance volumes. Its equity underwriting revenue jumped 8.6%, after more than doubling in the year-ago quarter.

The bank was among the joint book-running managers on big initial public offerings late in the quarter, including electric aircraft maker BETA Technologies, tax advisory firm Andersen Group, and medical supply giant Medline, the biggest IPO of 2025.

The bank also served as the exclusive advisor to Meta on the tech giant’s joint venture with Blue Owl Capital to develop the Hyperion data center campus in Louisiana.

Equities trading brought in record revenue for the year, as clients rebalanced their portfolios amid volatile markets whipsawed by shifting monetary policy expectations and concerns about an AI bubble.

Morgan Stanley landed key roles in marquee deals during the quarter, including advising data infrastructure company Confluent on its $11 billion deal to be bought by IBM.

WEALTH MANAGEMENT SHINES

Revenue from wealth management rose 13% to $8.43 billion in the quarter, buoyed by rising markets, helping the unit bring in record revenue for the year.

Yeshaya said the bank is close to reaching its long-term goal of $10 trillion in client assets managed by the wealth division.

Part of the $122.3 billion in net new assets in the quarter came from introductions from clients of the investment banking division that needed wealth management advice after concluding deals.

Morgan Stanley has focused on wealth management’s stable, fee-based revenues, to cushion itself against more volatile businesses like trading and investment banking.

The business further stands out as the U.S. economy increasingly moves into what economists call a “K-shaped” economy, in which affluent and wealthy consumers continue to drive spending as their assets appreciate in value.

The unit’s fee-based asset flows were $45.6 billion.

Its investment management division also delivered record net revenue of $6.5 billion for the year.

DOUBLING DOWN ON CRYPTO

Last week, Morgan Stanley sought approval from the U.S. Securities and Exchange Commission to launch exchange-traded funds tied to the price of bitcoin, solana, and ethereum. The move would represent a big step by the bank to become more active in crypto.

After receiving strong support from Trump, the crypto industry is expected to gain further with a market structure bill moving through Washington.

Fiscal stimulus and higher tax refunds could spur investor appetite in crypto this year, analysts have said.

(Reporting by Ateev Bhandari in Bengaluru, editing by Lananh Nguyen and Sriraj Kalluvila)