Morgan Stanley (MS) just delivered the kind of quarter that makes bankers smile. The firm reported fourth-quarter earnings of $2.68 per share on Thursday, up from $2.22 a year ago and comfortably beating the consensus estimate of $2.41. Net earnings climbed 18% year-over-year to $4.397 billion, capping what CEO and Chairman Ted Pick called "outstanding performance" for 2025.

"Our performance reflects multi-year investments which have contributed to growth and momentum across the Integrated Firm," Pick said in a statement. Translation: all those bets the bank has been making are starting to pay off in a big way.

The Numbers Tell a Growth Story

Revenue hit $17.89 billion for the quarter, up 10% year-over-year and topping the consensus of $17.77 billion. The firm's expense efficiency ratio improved to 68% compared to 71% a year ago, showing the bank is generating more revenue per dollar spent while still pumping money into strategic initiatives.

Return on tangible common equity reached 21.6% for 2025, compared to 18.8% the prior year. The bank's Standardized Common Equity Tier 1 capital ratio stood at 15.0% at year-end, indicating a solid capital cushion.

Investment Banking Catches Fire

The real star of the show was Institutional Securities, which posted fourth-quarter revenues of $7.9 billion compared with $7.3 billion a year ago. Investment banking sales absolutely exploded, jumping 47% to $2.4 billion on higher completed M&A transactions and IPO activities.

Equity net revenues increased 10% to $3.7 billion, driven by strong client activity across businesses and regions, plus financing revenues from higher client balances in prime brokerage. Fixed income was the one soft spot, with net revenues declining 9% to $1.76 billion, primarily due to lower results in commodities from fewer structured transactions and in foreign exchange on reduced volatility.

Wealth Management Keeps Winning

Wealth Management revenues reached $8.4 billion, reflecting solid asset management revenues, robust client activity levels, and higher net interest income. The division showed continued growth with net new assets of $122.3 billion and fee-based asset flows of $45.6 billion for the quarter. Bloomberg reported those net new asset figures came in far above expectations.

Investment Management contributed net revenues of $1.72 billion, primarily driven by asset management fees on higher average assets under management. Total client assets across Wealth and Investment Management reached $9.3 trillion, supported by more than $350 billion in net new assets.

Capital Returns and Looking Ahead

The firm returned significant capital to shareholders, repurchasing $1.5 billion of common stock during the quarter and $4.6 billion over the full year. The board also declared a $1.00 per share quarterly dividend, payable on February 13, 2026, to shareholders of record as of January 30, 2026.

"All of our investments are working," CFO Sharon Yeshaya said in an interview with Bloomberg, pointing to share gains in both advisory and debt capital markets. On data centers specifically, she noted that "the hyperscalers are looking for access to capital markets, and we're there to provide those structured solutions."

In a separate Reuters interview, Yeshaya said dealmaking activity is broadening, with strong pipelines supporting momentum. She expects a higher volume of IPOs in 2026 alongside continued M&A activity, with deal acceleration in healthcare, industrials, and sponsor-led transactions. Yeshaya also noted that investment banking introductions are helping attract more net new assets to the wealth business, and said she sees no change in the favorable regulatory environment.

Price Action: Despite the strong results, Morgan Stanley shares were down 2.23% at $178.68 during premarket trading on Thursday.