Morgan Stanley (MS) and Bank of America (BAC) climb on strong earnings and resilient U.S. consumer spending.
Dealmaking and trading rebounds powered Morgan Stanley and Bank of America to double-digit earnings growth, signaling renewed strength across Wall Street.
Key Points
- Morgan Stanley’s profit jumped 45% as investment banking and equity trading surged.
- Bank of America delivered record net interest income and an 11% rise in total revenue.
- Both stocks rallied sharply as Wall Street’s dealmaking and capital markets momentum accelerated.
Why Bank Earnings Are Booming Again
After a sluggish start to the year, the third quarter brought a clear turnaround for Wall Street’s biggest banks. Morgan Stanley and Bank of America both crushed analyst expectations as dealmaking, trading, and wealth management revenues roared back to life. The resurgence reflects a broader recovery in CEO confidence and market activity after months of hesitation earlier in 2025.
Morgan Stanley’s Investment Banking Revival
Morgan Stanley posted revenue of roughly $18.2 billion, beating Wall Street estimates by more than 9%. Net income soared to $4.6 billion as investment banking fees climbed 44% year-on-year to $2.1 billion. Rebounding IPO activity and merger momentum fueled this surge, alongside record performance in equity trading, which jumped 35% to $6.3 billion. Analysts noted that the firm’s diversified model — with strong results in Wealth Management and Institutional Securities — positions it well heading into 2026.
Bank of America’s Record Quarter
Bank of America (BAC) also turned in one of its strongest performances in years, with profits up 23% to $8.47 billion. Revenue rose 11% to exceed $28 billion, powered by record net interest income of $15.2 billion and a 43% jump in investment banking fees. Trading and wealth management also saw double-digit growth, reflecting broad-based strength across the bank’s operations.
Dealmaking and Market Tailwinds Drive Growth
Both banks benefited from a wave of corporate activity, including high-profile mergers like Union Pacific’s $71 billion acquisition of Norfolk Southern and Keurig Dr Pepper’s $18 billion deal for JDE Peet’s — transactions where BAC and MS both played key advisory roles. A steadier rate backdrop and surging stock markets provided additional support, leading to higher client engagement and stronger fee generation.
Are Bank Stocks Set for Further Gains?
The rally in bank shares — with BAC up nearly 5% and MS up more than 6% — suggests investors see more upside ahead. The improvement in credit quality and rising tangible book values point to healthier balance sheets. However, questions remain around whether this momentum can continue once interest-rate tailwinds fade. For now, the outlook remains positive, driven by resilient capital markets and expanding client activity.
What It Means for Investors
For investors, the takeaway is clear: Wall Street’s biggest banks are back in growth mode. Both Morgan Stanley and Bank of America demonstrated strong operating leverage and diversified earnings power. While cyclical tailwinds like rising deal flow and market optimism have helped, the results also highlight each firm’s long-term strengths — MS’s trading and advisory depth, and BAC’s scale in lending and wealth management.
Investors seeking exposure to large-cap financials may find renewed opportunities here, especially as both banks continue to benefit from increased liquidity and capital-markets activity heading into 2026.
Conclusion
The third-quarter results from Bank of America and Morgan Stanley showcase a sector firing on all cylinders. With profits, fees, and client activity all surging, the two banking giants have set the tone for what could be another strong earnings season across the financial sector. For Wall Street — and for investors — the message is clear: the banking boom is back.
FAQs
Why did Morgan Stanley’s profit surge this quarter?
Morgan Stanley’s profit jumped 45% due to a sharp rebound in dealmaking and record equity trading activity. The firm’s diversified model, spanning Wealth Management and Institutional Securities, helped it outperform peers.
What drove Bank of America’s record results?
Bank of America’s performance was fueled by record net interest income and strong investment-banking fees. Broad growth across trading, lending, and wealth management added to the momentum.
Are big banks benefiting from rising markets?
Yes. Rising equity markets and increased merger activity have boosted trading volumes and advisory fees for major U.S. banks, including MS and BAC.
Is it a good time to invest in Morgan Stanley or Bank of America?
Both stocks have strong fundamentals and are benefiting from cyclical tailwinds, though investors should watch interest-rate trends and dealmaking activity for sustainability signals.
How do these results compare to peers like Goldman Sachs and JPMorgan?
Morgan Stanley and Bank of America both outperformed peers in investment-banking growth, with deal fees rising more than 40% versus the teens for JPMorgan and Goldman Sachs.
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