Morgan Stanley's equities business is on fire
Morgan Stanley CEO Ted Pick used to be an equities trader and when the bank announced its second quarter results, Pick shared some opinions about what it takes to run a successful equities business. Today's third quarter results from Morgan Stanley suggest they were all very well-founded.
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As the chart below shows, Morgan Stanley's equities salespeople and traders and its equity capital markets bankers were its biggest outperformers in the third quarter versus their rivals at JPMorgan, Goldman Sachs, Citi and Bank of America.
What made Morgan Stanley's equities business so successful? The bank highlighted "record" results in its prime brokerage business which deals with hedge funds and "robust" client activity across sales and trading. Goldman Sachs also said it achieved "record average prime balances" yesterday. So too did Citi - which is fervently trying to build its prime business. However, Morgan Stanley seemed to benefit more. The bank has been leaning on its prime business to gain market share since at least late 2024
In ECM, Morgan Stanley said its bankers benefitted from higher IPOs and more convertible offerings. Year-on-year, its ECM revenues were up 80%.
Morgan Stanley appointed new global heads of ECM in August year, when it promoted Arnaud Blanchard, Eddie Molloy and Martin Thorneycroft, who are presumably feeling pleased with themselves. The bank's prime brokerage business globally is run by two women: Penny Novick and Kim Shaw.
The success of Morgan Stanley's equities business helped drive the return on average tangible common equity in its institutional securities business to 20% in the third quarter of 2025, from 12% a year previously. Profits in the business were up 38% year-on-year in the first nine months.
Pay is also increasing, albeit by less. Spending on compensation in Morgan Stanley's institutional securities business rose 12% in the first nine months. The bank said this was because of deferred compensation expenses and higher salaries.
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