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Global M&A to Improve in 2025: 3 Investment Bank Stocks to Consider
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The pace of global mergers and acquisitions (M&A) activity gained momentum this year, and there are signs that deal-making will accelerate in 2025. A favorable interest rate environment, strong economic growth and a solid deal pipeline set the stage for a revitalized investment banking (IB) business in 2025.
According to dealogic, global M&A’s total deal value has increased 15% so far this year to approximately $3.45 trillion, recovering from a decade-low in 2023. Notably, transactions over $10 billion rose to 37 deals, up from 35 in 2023.
With improving global M&A trends, investors can keep an eye on investment banks like Raymond James Financial, Inc. (RJF - Free Report) , Morgan Stanley (MS - Free Report) and The Goldman Sachs Group, Inc. (GS - Free Report) to generate robust returns.
The Investment bank industry has widely outperformed the S&P 500 Index and the Finance sector so far this year. The Zacks Investment Bank industry has appreciated 37.6% year to date, and the Zacks S&P 500 composite and Finance sector have gained 25.2% and 17.4%, respectively.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
The outlook for M&A activity in 2025 remains positive, driven by several key factors, including relatively lower interest rates, strong equity markets and resilient debt markets, which are expected to create a favorable environment for dealmakers.
Additionally, the new Trump administration is expected to further fuel M&A momentum by easing regulatory oversight, fostering a more deal-friendly climate. This shift could intensify competition for attractive targets, potentially driving up deal valuations, which currently remain at moderate levels.
Looking ahead to 2025, the EY-Parthenon Deal Barometer forecasts a 10% increase in deal volume. The pent-up demand is likely to drive significant growth in private equity (PE) with an expected 16% increase in deal volume compared to corporate, which is likely to record an 8% rise. Also, per a Reuters report, global deal volumes are expected to surpass $4 trillion in 2025, the highest in four years.
Considering the favorable outlook, it's an opportune time for investors to keep fundamentally strong investment banking stocks mentioned above on their radar to leverage growing opportunities.
3 Investment Bank Stocks to Bet On
Investors can consider the above-mentioned Investment Bank stocks with solid fundamentals and strong growth projections to generate healthy returns in 2025.
To choose these Investment bank stocks, we ran the Zacks Stocks Screener to identify stocks with an expected 2025 earnings growth rate of more than 5% and year-to-date price performance above 30%. Also, these stocks currently sport a Zacks Rank #1 (Strong Buy), or 3 (Hold).
Raymond James: Headquartered in St. Petersburg, FL, RJF is a diversified financial services company operating primarily in the United States and Canada.
The company has accomplished several opportunistic deals over the past years, which have helped expand its footprint in Europe and Canada. In fiscal 2023, the company acquired Canada-based Solus Trust Company Limited. In fiscal 2022, the company acquired SumRidge Partners, TriState Capital Holdings and the U.K.-based Charles Stanley Group PLC, while in fiscal 2021, it acquired Cebile Capital and a boutique investment bank, Financo. These deals, along with several past ones, have positioned Raymond James well for future growth. Management looks forward to actively growing through acquisitions to strengthen the PCG and Asset Management segments.
The company’s IB fees (in the Capital Markets segment) declined 4% in fiscal 2022 and 41% in fiscal 2023 with subdued M&A activity. Nonetheless, the trend is reversing of late. In fiscal 2024, IB fees grew 7% as clarity on several macroeconomic matters, the higher chances of the soft landing of the U.S. economy and interest rate cuts globally drove deal-making activities. The company will likely witness a solid improvement in IB fees going forward, driven by a healthy pipeline and active M&A market.
The Zacks Consensus Estimate for the company’s earnings per share for 2024 and 2025 is pegged at $10.92 and $11.55, respectively. The Zacks Consensus Estimate for 2024 and 2025 earnings implies an increase of 8.66% and 5.75%, respectively.
Goldman: The company is sharpening its focus on its core strengths in IB and trading while scaling back its consumer banking footprint. The strategic pivot aligns with the company’s efforts to concentrate on areas where it has consistently demonstrated strong performance.
Per the Wall Street Journal report, in November 2024, Apple proposed to Goldman to cease former credit card and savings account arrangements within the next 12-15 months. In October 2024, Goldman finalized a deal to transfer its GM credit card business to Barclays PLC (BCS - Free Report) . Barclays will obtain the card program’s receivables from the company next year. Earlier this year, Goldman completed the sale of GreenSky, its home-improvement lending platform, to a consortium of investors. Last year, the company sold its Personal Financial Management unit to Creative Planning.
These moves align with GS' decision to shift its focus on and grow core businesses, where it has showcased encouraging results, given its strong leadership position, the wide scale of operations and exceptional talent.
In 2022 and 2023, GS’ IB revenues declined 47.9% and 15.5% year over year, respectively. However, a substantial improvement in the industry-wide deal value and volume in the first nine months of 2024 drove the global M&As. Hence, the company’s IB revenues jumped nearly 24% from the first nine months of 2024.
Leveraging its leadership position, extensive operational scale and exceptional talent, the company aims to bolster its core businesses and drive growth in areas where it has a competitive edge.
The Zacks Consensus Estimate for the company’s earnings per share for 2024 and 2025 is pegged at $37.05 and $43.04, respectively. The Zacks Consensus Estimate for 2024 and 2025 earnings implies an increase of 62% and 16.17%, respectively.
GS shares have risen 46.8% so far this year. The company carries a Zacks Rank #3.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Morgan Stanley: As global deal-making came to a grinding halt at the beginning of 2022, it weighed on Morgan Stanley’s IB performance. The company’s IB fees (in the IS segment) plunged 49% in 2022 and 13% in 2023. Nonetheless, the trend has been reversing. In the first nine months of 2024, IB fees jumped 39% as clarity on several macroeconomic matters, the higher chances of the soft landing of the U.S. economy and interest rate cuts globally drove deal-making activities. The company will likely witness a solid improvement in IB fees, driven by a healthy pipeline and active M&A market.
Morgan Stanley has lowered its reliance on capital markets for income generation. The company’s focus on expanding its wealth and asset management operations and the strategic acquisitions, including Eaton Vance, E*Trade Financial and Shareworks, are steps in that direction. These moves have bolstered Morgan Stanley’s diversification efforts, enhanced stability and created a more balanced revenue stream across market cycles. Both businesses’ contribution to net revenues jumped to more than 57% in 2023 from 26% in 2010.
The company’s global presence, rebound in the investment banking business and efforts to focus on less volatile revenue streams provide a solid base for organic growth.
The Zacks Consensus Estimate for the company’s earnings per share for 2024 and 2025 is pegged at $7.36 and $7.92, respectively. The Zacks Consensus Estimate for 2024 and 2025 earnings implies an increase of 34.8% and 7.58%, respectively.
MS shares have risen 32.4% so far this year. The company currently carries Zacks Rank #3.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
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Global M&A to Improve in 2025: 3 Investment Bank Stocks to Consider
The pace of global mergers and acquisitions (M&A) activity gained momentum this year, and there are signs that deal-making will accelerate in 2025. A favorable interest rate environment, strong economic growth and a solid deal pipeline set the stage for a revitalized investment banking (IB) business in 2025.
According to dealogic, global M&A’s total deal value has increased 15% so far this year to approximately $3.45 trillion, recovering from a decade-low in 2023. Notably, transactions over $10 billion rose to 37 deals, up from 35 in 2023.
With improving global M&A trends, investors can keep an eye on investment banks like Raymond James Financial, Inc. (RJF - Free Report) , Morgan Stanley (MS - Free Report) and The Goldman Sachs Group, Inc. (GS - Free Report) to generate robust returns.
The Investment bank industry has widely outperformed the S&P 500 Index and the Finance sector so far this year. The Zacks Investment Bank industry has appreciated 37.6% year to date, and the Zacks S&P 500 composite and Finance sector have gained 25.2% and 17.4%, respectively.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
The outlook for M&A activity in 2025 remains positive, driven by several key factors, including relatively lower interest rates, strong equity markets and resilient debt markets, which are expected to create a favorable environment for dealmakers.
Additionally, the new Trump administration is expected to further fuel M&A momentum by easing regulatory oversight, fostering a more deal-friendly climate. This shift could intensify competition for attractive targets, potentially driving up deal valuations, which currently remain at moderate levels.
Looking ahead to 2025, the EY-Parthenon Deal Barometer forecasts a 10% increase in deal volume. The pent-up demand is likely to drive significant growth in private equity (PE) with an expected 16% increase in deal volume compared to corporate, which is likely to record an 8% rise. Also, per a Reuters report, global deal volumes are expected to surpass $4 trillion in 2025, the highest in four years.
Considering the favorable outlook, it's an opportune time for investors to keep fundamentally strong investment banking stocks mentioned above on their radar to leverage growing opportunities.
3 Investment Bank Stocks to Bet On
Investors can consider the above-mentioned Investment Bank stocks with solid fundamentals and strong growth projections to generate healthy returns in 2025.
To choose these Investment bank stocks, we ran the Zacks Stocks Screener to identify stocks with an expected 2025 earnings growth rate of more than 5% and year-to-date price performance above 30%. Also, these stocks currently sport a Zacks Rank #1 (Strong Buy), or 3 (Hold).
Raymond James: Headquartered in St. Petersburg, FL, RJF is a diversified financial services company operating primarily in the United States and Canada.
The company has accomplished several opportunistic deals over the past years, which have helped expand its footprint in Europe and Canada. In fiscal 2023, the company acquired Canada-based Solus Trust Company Limited. In fiscal 2022, the company acquired SumRidge Partners, TriState Capital Holdings and the U.K.-based Charles Stanley Group PLC, while in fiscal 2021, it acquired Cebile Capital and a boutique investment bank, Financo. These deals, along with several past ones, have positioned Raymond James well for future growth. Management looks forward to actively growing through acquisitions to strengthen the PCG and Asset Management segments.
The company’s IB fees (in the Capital Markets segment) declined 4% in fiscal 2022 and 41% in fiscal 2023 with subdued M&A activity. Nonetheless, the trend is reversing of late. In fiscal 2024, IB fees grew 7% as clarity on several macroeconomic matters, the higher chances of the soft landing of the U.S. economy and interest rate cuts globally drove deal-making activities. The company will likely witness a solid improvement in IB fees going forward, driven by a healthy pipeline and active M&A market.
The Zacks Consensus Estimate for the company’s earnings per share for 2024 and 2025 is pegged at $10.92 and $11.55, respectively. The Zacks Consensus Estimate for 2024 and 2025 earnings implies an increase of 8.66% and 5.75%, respectively.
RJF shares have risen 39% so far this year. The company currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Goldman: The company is sharpening its focus on its core strengths in IB and trading while scaling back its consumer banking footprint. The strategic pivot aligns with the company’s efforts to concentrate on areas where it has consistently demonstrated strong performance.
Per the Wall Street Journal report, in November 2024, Apple proposed to Goldman to cease former credit card and savings account arrangements within the next 12-15 months. In October 2024, Goldman finalized a deal to transfer its GM credit card business to Barclays PLC (BCS - Free Report) . Barclays will obtain the card program’s receivables from the company next year. Earlier this year, Goldman completed the sale of GreenSky, its home-improvement lending platform, to a consortium of investors. Last year, the company sold its Personal Financial Management unit to Creative Planning.
These moves align with GS' decision to shift its focus on and grow core businesses, where it has showcased encouraging results, given its strong leadership position, the wide scale of operations and exceptional talent.
In 2022 and 2023, GS’ IB revenues declined 47.9% and 15.5% year over year, respectively. However, a substantial improvement in the industry-wide deal value and volume in the first nine months of 2024 drove the global M&As. Hence, the company’s IB revenues jumped nearly 24% from the first nine months of 2024.
Leveraging its leadership position, extensive operational scale and exceptional talent, the company aims to bolster its core businesses and drive growth in areas where it has a competitive edge.
The Zacks Consensus Estimate for the company’s earnings per share for 2024 and 2025 is pegged at $37.05 and $43.04, respectively. The Zacks Consensus Estimate for 2024 and 2025 earnings implies an increase of 62% and 16.17%, respectively.
GS shares have risen 46.8% so far this year. The company carries a Zacks Rank #3.
Year-to-Date Price Performance
Image Source: Zacks Investment Research
Morgan Stanley: As global deal-making came to a grinding halt at the beginning of 2022, it weighed on Morgan Stanley’s IB performance. The company’s IB fees (in the IS segment) plunged 49% in 2022 and 13% in 2023. Nonetheless, the trend has been reversing. In the first nine months of 2024, IB fees jumped 39% as clarity on several macroeconomic matters, the higher chances of the soft landing of the U.S. economy and interest rate cuts globally drove deal-making activities. The company will likely witness a solid improvement in IB fees, driven by a healthy pipeline and active M&A market.
Morgan Stanley has lowered its reliance on capital markets for income generation. The company’s focus on expanding its wealth and asset management operations and the strategic acquisitions, including Eaton Vance, E*Trade Financial and Shareworks, are steps in that direction. These moves have bolstered Morgan Stanley’s diversification efforts, enhanced stability and created a more balanced revenue stream across market cycles. Both businesses’ contribution to net revenues jumped to more than 57% in 2023 from 26% in 2010.
The company’s global presence, rebound in the investment banking business and efforts to focus on less volatile revenue streams provide a solid base for organic growth.
The Zacks Consensus Estimate for the company’s earnings per share for 2024 and 2025 is pegged at $7.36 and $7.92, respectively. The Zacks Consensus Estimate for 2024 and 2025 earnings implies an increase of 34.8% and 7.58%, respectively.
MS shares have risen 32.4% so far this year. The company currently carries Zacks Rank #3.
Year-to-Date Price Performance
Image Source: Zacks Investment Research