Morgan Stanley & Co. (ms): 2Q26: Riding the capital markets super cycle

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Morgan Stanley & Co. (ms): 2Q26: Riding the capital markets super cycle

Goldman Sachs Morgan Stanley & Co. (MS)

investment opportunities across both trading businesses and wealth, the company

continues to evaluate inorganic growth opportunities, although the bar for acquisitions

is high. 5) MS continues to have considerable levels of excess capital (we estimate

250bps of CET1 or $15bn)2 which places them in strong position to benefit from

elevated levels of client demand for financing, across a range of businesses, in which risk

adjusted returns are currently very attractive.

Factoring quarterly results and management commentary, we increase our

2026E/27E EPS estimates by 3%/1%. We increase our target P/E multiple by 0.5x to

17.0x, resulting in our price target increasing to $241 (from $233 previously).

n Strong wealth management trends: MS delivered 8.1%/5.6% annualized net new

assets/fee based flows, vs. GSe of 7.8%/6.5%, with net new assets/fee-based flows

above the high end/at the lower end of MS’ long term guidance of 5-7%. Wealth NII

came in 3% above consensus, as wealth deposit balances were 3% above the Street,

while avg. wealth deposit costs of 2.54% were 1bp higher QoQ, and 1bps above GSe.

The company noted that slightly more than 50% of their 2Q26 NNA was from the

workplace channel. It also guided to modest sequential 3Q26 NII growth QoQ.

Finally, the company reiterated its 30% pre-tax margin, and did not commit to

increasing this, noting that it continues to invest in the business. Altogether, our

2028E GWM revenue increases 1%, and our 2026E/27E/28E GWM PT margins

changes by ~+5bps/-5bps/-5bps.

n Capital markets: Trading revenue was 19% above the Street on 36% better Equities,

partially offset by 3% lower FICC (both vs. Street).