The latest Wells Fargo report, titled “Goliath is winning in Capital Markets,” provides a comprehensive overview of the remarkable resurgence seen among the five largest banks in America. These banks—JP Morgan Chase & Co., Citigroup, Bank of America, Goldman Sachs, and Morgan Stanley—have collectively experienced their most robust performance in capital markets in the past five years. This resurgence has been particularly pronounced in revenues generated from activities such as stocks, bonds, and other long-term investments.
According to the report obtained by Fortune, all five banks exceeded Wells Fargo’s conservative projections in the last quarter, marking a significant milestone after experiencing declining revenues in the capital markets since 2020. Capital markets revenue surged across the board by 25%, reflecting renewed investor confidence and heightened market activity. This resurgence has propelled total capital markets revenue for these banks to $128 billion last year, with expectations pointing to a further increase to $139.4 billion next year.
The strong performance of these banks is also reflected in their stock market ratings. Analysts at Wells Fargo Securities have assigned overweight ratings to four of the banks, indicating their belief that these stocks will outperform the broader market. For instance, Goldman Sachs, currently trading at $505.15, has a target price of $550, while JP Morgan Chase, priced at $212.75, has a target of $225. Citigroup, listed at $67.36, is aiming for $85, and Bank of America, at $44.15, has a target of $52. Meanwhile, Morgan Stanley is rated as equal weight, suggesting its performance is expected to align closely with broader market trends.
In their analysis, Wells Fargo’s equity analysts, including Mike Mayo, Christopher Spahr, and Robert Rutschow, highlighted the positive outlook conveyed by bank management teams regarding the early stages of recovery in capital markets. They emphasized the ample dry powder still available for deployment by private capital, indicating ongoing optimism about future growth prospects in this sector.
Recent quarterly reports from these banks have underscored their strong financial performance. Morgan Stanley reported a substantial 24% year-over-year increase in capital markets revenue, while JP Morgan Chase saw an 18% rise, Goldman Sachs achieved a 14% increase, Citigroup recorded a 13% growth, and Bank of America reported an 11% uptick. These results mark the highest revenues reported over any four consecutive quarters since the end of 2022, signaling a robust turnaround from previous downturns in capital market activities.
Key drivers of this growth include increased activity in mergers and acquisitions, robust demand for debt and equity underwriting services, and strong performance in fixed income and equities sales and trading (FICC). These segments have not only contributed significantly to revenue growth but also demonstrated resilience and adaptability in navigating market fluctuations.
Overall, the resurgence of capital markets activities among these major banks underscores their pivotal role in the financial ecosystem. Their ability to capitalize on market opportunities, coupled with strategic investments and client-centric approaches, positions them strongly amid evolving economic conditions and market dynamics. This resurgence not only boosts investor confidence but also supports broader economic recovery efforts, underscoring the critical interplay between financial market performance and overall economic health.