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Buy These 3 Investment Bank Giants After Solid Q1 Earnings and Outlook
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Key Takeaways
Morgan Stanley posted strong Q1 results, driven by capital markets, asset and wealth management growth.
Bank of America is leveraging AI and a "phygital" strategy, boosting margins and higher 2026 NII growth.
Citigroup benefits from higher NII and transformation efforts, targeting revenue growth through 2026.
The first-quarter 2026 earnings season has started with strong momentum. So far, major banks and financial institutions have reported their quarterly numbers. As of April 24, 138 companies from the S&P 500 Index reported earnings.
Total earnings for these 138 index members are up 23.1% from the same period last year on 9.6% higher revenues. Moreover, 76.8% beat EPS estimates and an equal proportion surpassed revenue estimates. Looking at Q1 2026 as a whole, total earnings of the S&P 500 companies are expected to increase by 14.5% from the same period last year, on 9.7% higher revenues.
The chart below shows the price performance of our three picks in the past three months.
Image Source: Zacks Investment Research
Morgan Stanley
Morgan Stanley’s first-quarter 2026 results showed capital market strength. Increased focus on asset and wealth management operations, along with its strategic alliances and acquisitions, will support MS’ top line.
The EquityZen acquisition broadens private market capabilities and should deepen client relationships over time. The performance of the investment banking (IB) business will continue to be driven by a strong pipeline, resilient M&A demand, lower rates and MS’ global footprint. Its efficient capital distributions reflect a solid balance sheet.
Morgan Stanley expects a modest sequential gain in the Wealth Management segment’s net interest income (NII) for the second quarter. Given the incremental loan growth expectation and deposit mix, NII is projected to continue trending higher.
Morgan Stanley has an expected revenue and earnings growth rate of 8.3% and 15.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 4.1% over the last 30 days.
Bank of America Corp.
Bank of America has been witnessing an increase in revenues over the past several years. BAC has been steadily embedding artificial intelligence (AI) across its operations, and this quiet transformation is emerging as a meaningful driver of operating margin expansion.
By integrating AI-driven digital capabilities with a targeted physical branch expansion strategy, the bank is building a “phygital” model that balances efficiency with customer engagement, an approach that is expected to allow BAC to streamline operations while simultaneously strengthening its revenue-generating capacity.
BAC provided strong guidance. Full year 2026 NII growth has been projected to 6% to 8% from 5-7% projected earlier. Operating leverage likely to stay at more than 200 basis points.
Bank of America has an expected revenue and earnings growth rate of 9.3% and 16.8%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 2.8% over the last 30 days.
Citigroup Inc.
Citigroup’s first-quarter 2026 results benefited from higher year-over-year NII. Ongoing transformation initiatives, including consumer business exits, cost cuts and operational streamlining, will likely support revenue growth of C as stranded costs and transformation spend begin to moderate.
Management expects revenues to see a 4-5% compound annual growth rate through 2026. C’s expansion into private credit boosts diversification, with a strong capital base supporting shareholder returns.
For 2026, management expects NII (excluding Markets) to increase 5-6% on a year-over-year basis in 2026. Citigroup anticipates an efficiency ratio of 60% in 2026, with another year of positive operating leverage.
Management continues to target a return on tangible common equity (RoTCE) of 10-11% in 2026. U.S Cards net credit loss (NCL) as a percentage of average loans is expected to be 4-4.5%. In 2025, U.S. Cards NCL was 4.1%.
Citigroup has an expected revenue and earnings growth rate of 8.4% and 33.3%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 0.8% over the last seven days.
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Buy These 3 Investment Bank Giants After Solid Q1 Earnings and Outlook
Key Takeaways
The first-quarter 2026 earnings season has started with strong momentum. So far, major banks and financial institutions have reported their quarterly numbers. As of April 24, 138 companies from the S&P 500 Index reported earnings.
Total earnings for these 138 index members are up 23.1% from the same period last year on 9.6% higher revenues. Moreover, 76.8% beat EPS estimates and an equal proportion surpassed revenue estimates. Looking at Q1 2026 as a whole, total earnings of the S&P 500 companies are expected to increase by 14.5% from the same period last year, on 9.7% higher revenues.
Here, we recommend three investment bank giants that have posted strong first-quarter financial numbers with a solid outlook. These are: Morgan Stanley (MS - Free Report) , Bank of America Corp. (BAC - Free Report) and Citigroup Inc. (C - Free Report) . Each of our stocks currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our three picks in the past three months.
Image Source: Zacks Investment Research
Morgan Stanley
Morgan Stanley’s first-quarter 2026 results showed capital market strength. Increased focus on asset and wealth management operations, along with its strategic alliances and acquisitions, will support MS’ top line.
The EquityZen acquisition broadens private market capabilities and should deepen client relationships over time. The performance of the investment banking (IB) business will continue to be driven by a strong pipeline, resilient M&A demand, lower rates and MS’ global footprint. Its efficient capital distributions reflect a solid balance sheet.
Morgan Stanley expects a modest sequential gain in the Wealth Management segment’s net interest income (NII) for the second quarter. Given the incremental loan growth expectation and deposit mix, NII is projected to continue trending higher.
Morgan Stanley has an expected revenue and earnings growth rate of 8.3% and 15.6%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 4.1% over the last 30 days.
Bank of America Corp.
Bank of America has been witnessing an increase in revenues over the past several years. BAC has been steadily embedding artificial intelligence (AI) across its operations, and this quiet transformation is emerging as a meaningful driver of operating margin expansion.
By integrating AI-driven digital capabilities with a targeted physical branch expansion strategy, the bank is building a “phygital” model that balances efficiency with customer engagement, an approach that is expected to allow BAC to streamline operations while simultaneously strengthening its revenue-generating capacity.
BAC provided strong guidance. Full year 2026 NII growth has been projected to 6% to 8% from 5-7% projected earlier. Operating leverage likely to stay at more than 200 basis points.
Bank of America has an expected revenue and earnings growth rate of 9.3% and 16.8%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 2.8% over the last 30 days.
Citigroup Inc.
Citigroup’s first-quarter 2026 results benefited from higher year-over-year NII. Ongoing transformation initiatives, including consumer business exits, cost cuts and operational streamlining, will likely support revenue growth of C as stranded costs and transformation spend begin to moderate.
Management expects revenues to see a 4-5% compound annual growth rate through 2026. C’s expansion into private credit boosts diversification, with a strong capital base supporting shareholder returns.
For 2026, management expects NII (excluding Markets) to increase 5-6% on a year-over-year basis in 2026. Citigroup anticipates an efficiency ratio of 60% in 2026, with another year of positive operating leverage.
Management continues to target a return on tangible common equity (RoTCE) of 10-11% in 2026. U.S Cards net credit loss (NCL) as a percentage of average loans is expected to be 4-4.5%. In 2025, U.S. Cards NCL was 4.1%.
Citigroup has an expected revenue and earnings growth rate of 8.4% and 33.3%, respectively, for the current year. The Zacks Consensus Estimate for the current year’s earnings has improved 0.8% over the last seven days.