Morningstar DBRS Upgrades Morgan Stanley's Long-Term Credit Ratings to AA (low) From A (high); Stable Trend

DBRS, Inc. (Morningstar DBRS) upgraded most of the credit ratings of Morgan Stanley (MS or the Company), including the Company's Long-Term Issuer Rating to AA (low) from A (high). At the same time, Morgan Stanley's short-term credit ratings were confirmed at R-1 (middle). The trend on all credit ratings is now Stable. The Intrinsic Assessment (IA) for the Company is AA, while its Support Assessment remains SA3. The Company's Long-Term Issuer Rating is positioned one notch below the IA.

KEY CREDIT RATING CONSIDERATIONS
The credit rating upgrade recognizes MS' sustained franchise momentum, including the Company's unique global positioning and integrated business model, which has driven consistent above peer-median returns. Looking forward, Morningstar DBRS sees MS as well positioned to achieve its long-term goals, including reaching $10 trillion in client assets and delivering a firmwide return on tangible common equity of 20%, even with ongoing uncertainty in the operating environment.

The credit ratings are underpinned by the overall strength of MS' franchise, which includes a mix of scaled businesses with leading market positions that provide durable earnings. The Company's effective risk management and strong balance sheet fundamentals are also taken into consideration. Additionally, the credit ratings consider MS' exposure to a wide range of capital markets activities that contribute to a notable level of market risk. While these activities support the franchise value, the related exposure elevates the Company's risk profile and can produce earnings volatility.

Morgan Stanley's IA of AA has been assigned at the low point of the IA range, which Morningstar DBRS views as appropriate, given the Company's exposure to capital markets activities and related revenue volatility.

CREDIT RATING DRIVERS
Given the Company's high credit ratings and business mix, a credit ratings upgrade is unlikely. A sustained deterioration of earnings or balance sheet fundamentals would result in a credit ratings downgrade. Any indications of significant weakening in MS' franchise because of reputational issues, risk management deficiencies or operational missteps, would also result in a downgrade.

Franchise Combined Building Block Assessment: Very Strong
The Company's very strong franchise is underpinned by the largest wealth and investment management platform globally by total net revenues and is in the top five by client assets with approximately $7.7 trillion. Overall, MS' Wealth and Investment Management businesses generate more than half of the Company's total net revenues, providing stability and predictability to results, which Morningstar DBRS views favorably from a credit ratings perspective.

MS' Institutional Securities' businesses also have top-tier positions globally across investment banking and trading activities. While the latter are capital intensive and contribute a notable amount of market risk and revenue volatility, they can still generate a substantial amount of revenue even during adverse market conditions, as evidenced in the Company's results during the coronavirus pandemic.

Earnings Combined Building Block Assessment: Strong
MS' ability to deliver steady and higher than peer-median profitability metrics provide key support to the credit ratings. In 2024, MS generated $62 billion in net revenue, which was up 14% from the prior year, reflecting momentum across businesses and regions. For the full year, MS reported a return on equity (ROE) of 14.0%, which Morningstar DBRS views favorably, particularly in the context of the operating environment. More recently, the Company delivered a strong ROE of 17.4% in Q1 2025. Highlights included a record performance in Equities, improved results in Fixed Income Underwriting, as well as $94 billion of net new assets and fee-based asset flows of $30 billion in Wealth Management.

Risk Combined Building Block Assessment: Very Strong/Strong
Morningstar DBRS views MS' risk management capabilities and cohesive culture as contributing to the strength of the franchise. Critical to the Company's success is its strong operational infrastructure, which supports risk management, compliance, and control functions, as well as its cost-efficient execution capabilities. While Morningstar DBRS acknowledges the risks associated with sizable capital markets businesses, particularly on a global scale, Morningstar DBRS sees MS as having effective risk management capabilities that allow it to make appropriate risk/reward decisions. Overall, Morningstar DBRS sees MS as having the appropriate processes and governance in place for managing risk across its businesses, considering its long and successful track record.

Funding and Liquidity Combined Building Block Assessment: Very Strong/Strong
MS has a comprehensive framework in place to manage its funding and liquidity needs. While the Company has a higher reliance on wholesale funding than its universal bank peers, Morningstar DBRS views MS' wholesale funding as well managed, with diverse funding sources, and well-laddered maturities. In addition, deposits remain as a more meaningful portion of the funding stack. At the end of Q1 2025, the Company had $382 billion of total deposits, representing 42% of core funding sources. Liquidity resources remain substantial, totaling $352 billion, or 27% of total assets.

Capitalization Combined Building Block Assessment: Very Strong/Strong
Despite ongoing capital returns to shareholders, the Company's capital metrics remain robust, with a peer-leading Standardized CET1 ratio of 15.3%, which was 180 basis points higher than its regulatory requirement. In 2024, MS announced a share repurchase program of up to $20 billion without a set expiration date and a 9% increase to the quarterly common dividend.

Further details on the Scorecard Indicators and Building Block Assessments can be found at https://dbrs.morningstar.com/research/456206.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025), https://dbrs.morningstar.com/research/454196.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (May 23, 2025; https://dbrs.morningstar.com/research/454637). In addition, Morningstar DBRS uses the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025; https://dbrs.morningstar.com/research/454196) in its consideration of ESG factors.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

The primary sources of information used for these credit ratings include Morningstar, Inc. and company documents Morningstar DBRS considers the information available to it for the purposes of providing these credit ratings was of satisfactory quality.

The credit ratings were initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for these credit rating actions.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with these credit rating actions.

These are solicited credit ratings.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website https://dbrs.morningstar.com/understanding-ratings

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom, and by DBRS Ratings GmbH for use in the European Union, respectively. The following additional regulatory disclosures apply to endorsed credit ratings:

The last credit rating action on this issuer took place on June 14, 2024.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS' trends and credit ratings are monitored.

Lead Analyst: Michael McTamney, Senior Vice President
Rating Committee Chair: Timothy O'Brien, Managing Director
Initial Rating Date: April 10, 1992

For more information on this credit or on this industry, visit https://dbrs.morningstar.com.

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