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, Morgan Stanley MS and The Goldman Sachs Group, Inc. GS 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.
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.
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.
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