We're Hiking One Bank Price Target, Maintaining Another
End-market mix remains key, and that means watching two key items going forward.
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With our trades from yesterday and today out of the way, let’s focus on bank earnings this week, and what we learned from Bank of America (BAC) and Morgan Stanley (MS) .
Based on the post-earnings share-price performance of Morgan Stanley and Goldman Sachs (GS) compared to JPMorgan Chase (JPM) , Citigroup (C) , Bank of America, and Wells Fargo (WFC) , we can quickly surmise that the end-market mix was a key determinant.
Wealth management and investment banking were strong drivers during the quarter, which was evident by looking at results from Morgan Stanley and Goldman. Morgan Stanley's investment banking revenue shot up 47% on a year-over-year basis in Q4 2025, while Goldman’s investment banking fees climbed 25%. And while commercial banking business grew, with Bank of America continuing to win deposit share, the rate of growth, including loan activity, was slower on a sequential basis.
We're not surprised by this, and it speaks to why we’ve favored MS shares over the last several months, noting Morgan Stanley's exposure to the profitable investment banking business and its rank in the league tables.
A Curve Ball From Washington
What many did not see until last Friday was President Trump’s comment that he wants to put a one-year 10% cap on credit card rates, and that had investors waiting to see how much teeth it really had and reactions from companies exposed to that part of the market.
Both JPMorgan’s CFO, Jeremy Barnum, and Bank of America’s CEO, Brian Moynihan talked about potential unintended consequences of a rate cap in terms of consumers losing access to credit. And yes, the cap, if passed, would compress credit card margins, but as of now, neither company offered any further insight. As Charles Scharf, Chairman and CEO of Wells Fargo, put it:
“…it's too early to know because we're not quite sure what the ultimate actions of whether it's the administration or of Congress choose to go down…”
This means we have another item for our Washington watch list, and as things become clear, we may have some adjustments to make.
Price Targets
For now, we will maintain our $65 price target for BAC shares as the story of rising net interest income, accompanied by continued cost containment, remains the same. BofA targets 200-basis points of operating leverage this year, and part of that includes its ongoing AI and digitization efforts as it aims to keep a lid on employee expansion. As Moynihan pointed out on the earnings call, headcount remains a key driver of the company’s expenses.
With investment banking strength poised to continue and market volatility benefiting its trading business, we will lift our MS price target to $205 from $185. Based on upcoming M&A and IPO activity, we will revisit that target as needed. We will share a comment from Goldman Chairman & CEO David Solomon that we could see “a bunch of IPOs this year and next year of very, very large companies, which is something we really haven't seen a lot of.”
Expected IPOs on the Way
As of now, some of the more highly anticipated IPOs to come include those for SpaceX, OpenAI, Anthropic, Databricks, Stripe, Revolut, and Canva. Those offerings are expected to be sizable, and that means IPO-related investment banking fees could jump higher.
Key details will be the offering size and which firms are chosen to lead the deals. Per Dealogic, Morgan Stanley ranked as the #2 book runner for global IPOs in 2025 and #1 in 2024. That positions the firm rather well, but we’ll still want to see its place on upcoming S-1 filings for those mega deals when they land at the SEC’s website.
Panic Points
On the housekeeping front, we will lift our MS panic point to $160 from $143 and keep our BAC panic point at $47. Following their post-earnings pullback, BAC shares are currently hugging the 100-day moving average at $52.42, and while that offers some support, we would hold off adding to the shares until we have more clarity on potential credit card caps.
At the time of publication, TheStreet Pro Portfolio was long MS and BAC.
