BAC or MS: Which Financial Giant Is a Better Bet Post Q1 Earnings?

Nikita Kataruka May 07, 2026

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Key Takeaways

BAC expects 6-8% NII growth in 2026, supported by loan growth and lower funding costs.
MS client assets hit $9.2T as wealth management and Asia operations gained momentum.
BAC has gained 0.6% in six months, while Morgan Stanley shares have rallied 19.1%.

Both Bank of America (BAC - Free Report) and Morgan Stanley (MS - Free Report) delivered robust first-quarter 2026 results that reinforced their standing as financial heavyweights. BAC benefited from higher net interest income (NII), resilient consumer activity and solid trading performance, while MS posted a record quarter, driven by robust institutional client engagement and continued momentum in wealth management.

While both firms operate across investment banking (IB), trading, advisory and asset management, their business models remain fundamentally different. Bank of America combines Wall Street operations with a massive consumer and commercial banking presence, while Morgan Stanley runs a more fee-driven model centered on wealth management, institutional securities and advisory services.

That sets up an intriguing post-first-quarter face-off for investors, raising the key question: which among BAC and MS is better-positioned to reward investors after earnings? In order to understand this, let us dig deep into their fundamental strengths and growth prospects.

The Case for BAC

Bank of America, the second-largest bank in the United States, is expected to witness continued improvement in NII in the near term, supported by loan growth, fixed-rate asset repricing and stabilizing funding costs, despite lower average rates. Over the last five years (2020-2025), the company’s NII saw a compound annual growth rate (CAGR) of 6.7%, with the uptrend continuing in the first quarter of 2026. Management expects NII (fully tax-equivalent) to grow 6-8% this year.

BAC’s IB business, which performed poorly in 2022 and 2023 (IB fees in the Global Banking division plunged 45.7% in 2022 and declined 2.4% in 2023), has rebounded of late. In 2024 and 2025, IB fees rose 31.4% and 8.4%, respectively. In the first quarter of this year, IB fees increased 23.6% year over year. Since the market for global mergers and acquisitions (M&As) has been improving, the company is expected to continue witnessing solid growth in IB fees, supported by a healthy pipeline.

In terms of its trading business, revenues have been improving since 2022. In the first quarter of 2026, sales and trading revenues, excluding net DVA, grew 12% year over year. But, even when results are favorable, the volatile nature of the capital markets business can create earnings variability and make growth challenging in the same.

Bank of America continues to prioritize organic, domestic growth through the expansion of its physical and digital presence. This is part of a broader strategy to solidify customer relationships and tap into new markets, driving NII over time. By 2027, the company plans to expand its financial center network and open more than 150 centers. With the growing use of tools like Zelle and artificial intelligence assistant Erica, the company is boosting digital engagement and cross-selling products like mortgages, auto loans and credit cards.

The Case for MS

Like BAC, Morgan Stanley’s trading business performance has also been impressive of late. In first-quarter 2026, equity trading income rose 25% year over year to a record $5.15 billion, while fixed-income revenues jumped 29%, driven by strong client activity and volatility in energy markets.

However, because of the inherent cyclicality in the trading business, Morgan Stanley has long been lowering its reliance on the capital markets for income generation to create a more balanced revenue stream across market cycles. The company has been expanding its wealth and asset management operations. It has used acquisitions like Eaton Vance, E*Trade Financial, Shareworks and EquityZen to broaden distribution.

As of March 31, 2026, total client assets across the firm’s wealth and investment management segments reached $9.2 trillion, bringing the company closer to its long-standing $10-trillion target set by former CEO James Gorman. The individual retirement account AUM in the wealth management arm remains above $1 trillion and management has noted that adviser-led assets sourced from Workplace and E*TRADE exceed $1.2 trillion.

Morgan Stanley has also been expanding its presence across Asia, viewing the region as a major long-term growth driver for its wealth business. The firm has deepened its long-standing partnership with Mitsubishi UFJ Financial Group, increasing focus on Japan’s growing asset management and high-net-worth segments. Morgan Stanley’s Asia revenues were $9.42 billion in 2025, up 23% year over year. The momentum carried into the first quarter of 2026, aided by higher prime brokerage balances and client activity.

Similar to BAC, Morgan Stanley’s IB business performance has been robust in the past couple of years, following a slowdown in 2022 and 2023. In the first quarter of this year, the company’s IB fees increased 36% year over year. A healthy global IB pipeline, an active M&A and IPO market, and the company’s leadership position are expected to continue to help it benefit amid the changing macro situation.

BAC & MS: Price Performance, Valuation & Other Comparisons

In the past six months, shares of Bank of America have gained merely 0.6%, while Morgan Stanley has rallied 19.1%. MS has outperformed the S&P 500 Index’s growth of 9.5%.

In terms of investor sentiments, Morgan Stanley clearly has the edge.