The bank is "already sitting on $6 billion to $10 billion of excess capital," a figure that will swell to $10 billion to $15 billion by year-end, Gorman said in a CNBC interview.
"Yeah, we need to do something with it," Gorman said, citing investments in technology and growth in his retail and institutional businesses. "We also should increase our dividend and we should be back on the buyback trail. Not just yet, let's get through the new stress test in September, let's see how the economy performs in the next three to six months."
"But in 2021, Morgan Stanley should do something with this capital for the benefit of our shareholders and our clients," he added.
Morgan Stanley shares perked up after Gorman's comments, rising 3.1% in early trading.
Of course, the Federal Reserve ultimately dictates whether institutions can raise dividends and resume buybacks. The industry halted repurchases in March at the onset of the pandemic, and the Fed capped dividends for most institutions, adopting a new formula for the payouts. Morgan Stanley pays a 35 cent quarterly dividend.
The bank benefited from one of Wall Street's best trading quarters in years. Surging volatility and the Federal Reserve's unprecedented actions to prop up credit markets boosted bond trading, and corporations seeking to build cash to survive the pandemic sparked a frenzy in debt issuance.
Morgan Stanley on Thursday posted second-quarter results that blew past analysts' estimates, generating record profit of $3.2 billion, or $1.96 a share including an 8 cent per share expense tied to taxes, exceeding the $1.12 estimate. Revenue climbed roughly 30% to a record $13.4 billion, a surprise increase that exceeded expectations by a full $3 billion.
Helping Morgan Stanley right now is a limited presence in retail banking, where anticipated losses on credit cards and other loans have forced rivals to set aside billions of dollars.
"We didn't have the credit losses that would typically come in this type of economic scenario," Gorman told CNBC.