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Sub-sector: Brokers
Fundamental View
AS OF 10 Mar 2025We view Morgan Stanley’s credit profile positively, supported by high capital levels, diversification in revenues and continued progress on building out wealth/asset management both organically and through acquisition.
Morgan Stanley’s capital markets businesses have rebounded as capital markets conditions improved in 2024, and should continue to benefit from market conditions in 2025. Wealth Management also saw some slowdown in growth in 2023 but appears back on track as market conditions improved.
Business Description
AS OF 10 Mar 2025- The company is now the sixth largest bank holding company by assets in the U.S. with $1.21 tn of assets as of 4Q24, and is the fourth largest by market capitalization ($192.5 bn as of March 7th, 2025).
- Morgan Stanley maintains "significant market positions in each of its business segments," which include Institutional Securities, Wealth Management, and Investment Management.
Risk & Catalysts
AS OF 10 Mar 2025Ted Pick took over as CEO in 2024, and MS was able to retain other key managers under consideration for the role; we see no clear changes in strategy as a result of the handover.
Much of Morgan Stanley’s core business is tied to global macroeconomic trends and investor risk appetite. Additionally, it has significant trading risk and counterparty exposures, though such risk appears well-managed overall and is reflected in capital requirements which are governed by the annual DFAST and SCB regime. MS has typically run with capital levels at or near the highest among GSIBs given the trading losses included in the Fed’s model.
Rapid growth in the Wealth business in recent years at MS has had some publicized missteps in vetting clients; there remains a possibility of regulatory action, though we wouldn’t expect anything that alters the long-term strategy for the Wealth business.
Key Metric
AS OF 10 Mar 2025| $ mn | FY20 | FY21 | FY22 | FY23 | 4Q24 |
|---|---|---|---|---|---|
| ROAE (annual) | 12.4% | 14.3% | 10.8% | 9.1% | 13.2% |
| ROAA (annual) | 1.0% | 1.3% | 0.9% | 0.8% | 1.1% |
| PPNR / Avg. Assets | 1.40% | 1.64% | 1.22% | 4.41% | 1.42% |
| Efficiency Ratio | 69% | 66% | 72% | 298% | 70% |
| Net charge-offs (LTM) / Loans | 0.05% | 0.05% | 0.01% | 0.06% | 0.08% |
| Common Dividend Payout | 20.9% | 25.4% | 46.3% | 215.5% | 42.9% |
| CET1 Ratio | 17.4% | 16.1% | 15.3% | 15.2% | 15.9% |
| Supplementary Leverage Ratio (SLR) | 7.4% | 5.6% | 5.5% | 5.5% | 5.6% |
| Liquidity Coverage Ratio (LCR) | 129% | 134% | 132% | 129% | 131% |
CreditSight View Comment
AS OF 17 Jan 2025We maintain our Market perform recommendation for Morgan Stanley, with our positive view of fundamentals supported by another solid quarter in 4Q24, where Morgan Stanley’s investment banking and trading results continued to improve along with market conditions. We see slightly better valuation among some of the money center banks (increasingly WFC, as well as Citi and BAC) but like MS relative to GS given similar spread levels recently. Performance has rebounded in the Wealth segment from a difficult 2023. Recent reports on difficulties in vetting international wealth clients could result in regulatory action, though we expect very manageable financial impacts largely from continued investments in compliance.
Recommendation Reviewed: January 17, 2025
Recommendation Changed: March 14, 2016
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Fundamental View
AS OF 10 Mar 2025Goldman Sachs’ performance and market share in its core legacy businesses of investment banking and sales and trading have remained very solid, working through soft periods associated with rising rates; with market conditions improving into 2025 these businesses should continue to excel.
Goldman’s results have been weighed in recent years by costs associated with exiting the unsuccessful foray into various consumer banking businesses; such costs are largely in the rearview mirror. Wealth and Asset Management are now the most likely areas of growth in the coming years, where Goldman can leverage its strengths in HNW and alternative asset management.
Business Description
AS OF 10 Mar 2025- Goldman Sachs is now the fifth largest bank holding company in the U.S. with approximately $1.68 tn in assets as of 4Q24 and a market capitalization of $185.0 bn as of March 7th, 2025.
- Goldman Sachs presents its activities through three business segments: Global Banking & Markets, Asset & Wealth Management, and Platform Solutions.
- Goldman's historical strengths include equity and FICC sales & trading, investment banking, institutional investment management including alternatives, and high net worth wealth management. It has been expanding its wealth management client base, and adding other stable fee income streams amid a sluggish capital market environment.
Risk & Catalysts
AS OF 10 Mar 2025The early 2020’s have been a mixed bag– the foray into consumer lending was costly and ultimately was reversed, diverting capital and management attention and providing a meaningful drag on profitability. Goldman has re-focused on its core businesses, though its profile will remain less diversified than large GSIB peers.
Goldman could participate in further M&A to achieve its long-term strategic goals, most likely through add-on deals related to asset/wealth management.
Goldman could be impacted by the lack of liquidity in the secondary markets during periods of market turmoil, but for the most part, has been positively impacted by bouts of volatility which tend to spur more client trading activity. Goldman is subject to significant market and counterparty risks though these are captured in the DFAST and SCB regime.
Key Metric
AS OF 10 Mar 2025| $ mn | FY20 | FY21 | FY22 | FY23 | 4Q24 |
|---|---|---|---|---|---|
| ROAE (annual) | 10.3% | 21.3% | 9.7% | 7.3% | 12.0% |
| ROAA (annual) | 0.8% | 1.5% | 0.7% | 0.5% | 0.8% |
| PPNR / Avg. Assets | 1.34% | 1.86% | 1.08% | 3.29% | 1.16% |
| Efficiency Ratio | 66% | 54% | 65% | 282% | 63% |
| Net charge-offs (LTM) / Loans | 0.70% | 0.19% | 0.30% | 0.68% | 0.61% |
| Common Dividend Payout | 19.0% | 10.6% | 28.4% | 158.9% | 26.6% |
| CET1 Ratio | 14.1% | 13.6% | 15.0% | 14.4% | 15.0% |
| Supplementary Leverage Ratio (SLR) | 6.9% | 5.5% | 5.8% | 5.5% | 5.5% |
| Liquidity Coverage Ratio (LCR) | 128% | 122% | 129% | 128% | 126% |
CreditSight View Comment
AS OF 21 Jan 2025We maintain our Market perform recommendation for Goldman Sachs; we remain quite comfortable with the name fundamentally but see better value at JPMorgan and Wells Fargo among money center banks, particularly in the context of our shift to a more defensive stance across the sector. Goldman should be back to a normal pace of issuance so technicals should not be quite as much of a tailwind going forward as they had been in 2023 and early 2024, though the fundamental picture continues to improve with improved capital markets conditions as well as reduced drag from exited businesses. We are expecting market conditions in 2025 to align well with GS franchise strengths in trading and investment banking, particularly the latter where we expect momentum to increase in ECM and advisory.
Recommendation Reviewed: January 21, 2025
Recommendation Changed: January 12, 2022
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