ROTCE 21.6% Against a 20% GoalWide moat

Morgan Stanley (MS) — moat facet

Morgan Stanley's return on tangible equity went from 9% in 2016 to 21.6% in 2025, and it beat its own 20% goal a year after setting it.

The number that tells whether Morgan Stanley's moat pays is its return on tangible common equity. It was 9.3% in 2016, 13.5% in 2018, 15.2% in 2020, 19.8% in 2021, 12.8% in 2023, 18.8% in 2024 and 21.6% in 20251. The firm puts the averages at 12.1% for 2016 to 2020 and 17.6% for 2021 to 20252.

Return on tangible common equity (%)9.320169.2201713.5201813.4201915.2202019.8202115.3202212.8202318.8202421.62025Morgan Stanley strategic update, January 2026
Doubled in a decade, with a dip in 2023.

The goal was 20%3. The firm beat it for 2025 and reported 26.6% in the second quarter of 20264.

The rise is the wealth strategy showing up in returns. Earnings from fees on client assets need less capital than trading, and the stress buffer fell as the mix changed. Return on equity, which includes the goodwill from acquisitions, was 16.6% in 20255.

Against an assumed 10% cost of equity, the same hurdle this app uses for JPMorgan and Bank of America, Morgan Stanley has cleared the bar in every year since 2018. In 2016 and 2017 it did not.

The quarterly figures have run above the goal all year. ROTCE was 27.1% in the first quarter of 2026 and 26.6% in the second, against 18.2% in the second quarter of 20256. For the first half it was 26.8%7, above every full-year figure the firm published for 2016 to 20258.

The five-year average is the fairer test than any single year, because 2025 and 2026 were strong markets. A run of two years below 15% would mean the higher average was a cycle, not a new level.

Moat trajectory: Widening

ROTCE average 12.1% (2016-2020) to 17.6% (2021-2025).

The number that tests this moat
Reported
ROTCE, latest quarter
26.6% (Q2 2026) vs 18.2% a year earlier

The return on the firm's tangible capital; two years below 15% would mean the higher level was cyclical.

Source: Morgan Stanley Q2 2026 earnings release ↗
⚠ Threats to the moat
⚠ THREAT 01
Tangible Equity Leaves Out the Deals
Morgan Stanley's 21.6% return on tangible equity is 16.6% once the $22.7 billion it paid for its acquisitions is counted.
References
  1. ReportedIt was 9.3% in 2016, 13.5% in 2018, 15.2% in 2020, 19.8% in 2021, 12.8% in 2023, 18.8% in 2024 and 21.6% in 2025.
    Morgan Stanley strategic update, The Integrated Firm: Executing on a Higher Plane, Form 8-K exhibit 99.3 - ROTCE 2016-2025, firmwide goals, five-year Wealth Management aggregates and wallet share. — 2016-2025 · publ. 15 January 2026 · source ↗
  2. ReportedThe firm puts the averages at 12.1% for 2016 to 2020 and 17.6% for 2021 to 2025.
    Morgan Stanley strategic update, The Integrated Firm: Executing on a Higher Plane, Form 8-K exhibit 99.3 - ROTCE 2016-2025, firmwide goals, five-year Wealth Management aggregates and wallet share. — 2016-2025 · publ. 15 January 2026 · source ↗
  3. ReportedThe goal was 20%.
    Morgan Stanley strategic update, The Integrated Firm: Executing on a Higher Plane, Form 8-K exhibit 99.3 - ROTCE 2016-2025, firmwide goals, five-year Wealth Management aggregates and wallet share. — 2016-2025 · publ. 15 January 2026 · source ↗
  4. ReportedThe firm beat it for 2025 and reported 26.6% in the second quarter of 2026.
    Morgan Stanley second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - firm results, returns and the chief executive's statement. — Q2 2026 · publ. 15 July 2026 · source ↗
  5. ReportedReturn on equity, which includes the goodwill from acquisitions, was 16.6% in 2025.
    Morgan Stanley Form 10-K for fiscal 2025 - balance sheet, deposits, loans, goodwill and credit provisions. — FY2025 · publ. 19 February 2026 · source ↗
  6. ReportedROTCE was 27.1% in the first quarter of 2026 and 26.6% in the second, against 18.2% in the second quarter of 2025.
    Morgan Stanley second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - firm results, returns and the chief executive's statement. — Q2 2026 · publ. 15 July 2026 · source ↗
  7. ReportedFor the first half it was 26.8%, above every full-year figure the firm published for 2016 to 2025.
    Morgan Stanley second-quarter 2026 earnings release, Form 8-K exhibit 99.1 - firm results, returns and the chief executive's statement. — Q2 2026 · publ. 15 July 2026 · source ↗
  8. ReportedFor the first half it was 26.8%, above every full-year figure the firm published for 2016 to 2025.
    Morgan Stanley strategic update, The Integrated Firm: Executing on a Higher Plane, Form 8-K exhibit 99.3 - ROTCE 2016-2025, firmwide goals, five-year Wealth Management aggregates and wallet share. — 2016-2025 · publ. 15 January 2026 · source ↗
Sources
Generated September 26, 2026