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Why JP Morgan, Goldman Sachs and Morgan Stanley are all beating expectations—’Goliath is winning’

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The five largest banks in America are continuing their winning streaks, as revealed by the latest Wells Fargo report. Entitled “Goliath is Winning in Capital Markets,” the report, obtained by Fortune, highlights the most significant rolling four-quarter capital market improvement in five years. This has significantly boosted big bank revenue from stocks, bonds, and other long-term investments.

JP Morgan Chase & Co., Citigroup, Bank of America, Goldman Sachs, and Morgan Stanley—all surpassed Wells Fargo’s conservative model last quarter. Capital markets revenue, generated from fees for providing market liquidity, increased by 25% across these banks after a decline since 2020. Total capital markets revenue for these five banks was $128 billion last year and is projected to reach $139.4 billion next year.

The stocks of four major banks are currently rated as overweight, indicating analysts expect them to outperform the market. Goldman Sachs has a current price of $505.15 with a target of $550, JP Morgan is priced at $212.75 with a target of $225, Citigroup is at $67.36 targeting $85, and Bank of America is listed at $44.15 targeting $52. Morgan Stanley is the only one rated as equal weight, meaning it is expected to match market movements, with a current price of $107.81 and a target of $99.00.
Wells Fargo Securities equity analysts Mike Mayo, Christopher Spahr, and Robert Rutschow noted in their latest report, “While global revenues have lagged trends at US banks, the trend appears to have reversed to the upside. Bank managements gave positive commentary about the capital markets recovery being in early stages and highlighted significant dry powder still to be deployed by private capital.” Recent quarterly reports from the past five days show a significant year-over-year increase in capital markets revenue for these banks: Morgan Stanley up 24%, JP Morgan up 18%, Goldman Sachs up 14%, Citigroup up 13%, and Bank of America up 11%.

The most recent four quarters’ revenue is higher than any four quarters since the quarter ending 2022. Overall revenues increased by 5% from the fourth quarter of 2023. Key areas such as mergers, debt underwriting, equity underwriting, and fixed income and equities sales and trading (FICC) all showed improved rolling four-quarter revenues.

This story was originally featured on Fortune.com.

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