Wall Street is expected to welcome a "harvest season"? The financial report season is coming, and Morgan Stanley has raised the target price of multiple banks.

The latest financial reporting season in the United States is about to begin, typically led by the big Wall Street banks. Before the major U.S. banks announce their financial reports next week, Morgan Stanley released a research report raising the price target for Goldman Sachs Group, Inc. (GS.US), JPMorgan Chase & Co. (JPM.US), Citigroup (C.US), Regions Financial Corporation (RF.US), PNC Financial Services Group, Inc. (PNC.US), U.S. Bancorp (USB.US), and Truist Financial Corporation (TFC.US). Morgan Stanley pointed out that the capital markets have become more active again, expecting stock trading to be very active and investment banking revenue to exceed management's expectations. Due to the recent relaxation of capital requirements after stress tests, Morgan Stanley expects management to begin announcing stock buyback plans and related management buffer measures. Among them, Morgan Stanley is most optimistic about the financial reports of Goldman Sachs Group, Inc. and JPMorgan Chase, both of which are given a "hold" rating, with their price targets respectively raised to $680 and $296. Morgan Stanley expects Goldman Sachs Group, Inc. to have earnings per share of $10 for the second quarter, which is 4% higher than the market expectation of $9.62, due to increased investment banking revenue, asset and wealth management revenue, and stock market revenue. Dealogic indicates that investment banking expenses at Goldman Sachs Group, Inc. increased by 20% year-on-year in the second quarter of 2025, benefiting from a 60% year-on-year growth in merger business, indicating an increase in market share for Goldman Sachs Group, Inc. Morgan Stanley includes a 20% year-on-year growth in investment banking expenses at Goldman Sachs Group, Inc. (higher than the market expectation of only 4%) in its consideration. Considering Goldman Sachs Group, Inc.'s focus on growth in financing income, Morgan Stanley expects a 16% year-on-year increase in revenue from the stock market for Goldman Sachs Group, Inc. (compared to the market expectation of 13%), while forecasting a 10% increase in peer revenue. Morgan Stanley also interpreted Goldman Sachs Group, Inc.'s recent increase in quarterly dividend expectations from $3.00 to $4.00, a 33% quarterly increase, as a positive signal from management regarding the outlook for investment banking. Morgan Stanley expects JPMorgan Chase to have earnings per share of $4.85 for the second quarter, 9% higher than the market expectation of $4.46, due to increased fee income, reduced provisions, and lower expenses. Dealogic shows that investment banking expenses at JPMorgan Chase only decreased by 5% year-on-year in the second quarter, better than the expected decrease of 14% to 16%. Morgan Stanley's model takes into account a 9% year-on-year decrease in investment banking expenses at JPMorgan Chase. Market rebound is also expected to support fee income from asset and wealth management, stock trading, and asset services. Capital markets active again After a brief pause in investment banking activities in early April, M&A and IPO businesses accelerated significantly in May and June. As of June 30, global announced M&A volume increased by 30% year-on-year in the second quarter, compared to a 22% year-on-year decrease on May 1. North American stock capital market trading volume increased by 49% at the end of the second quarter on June 30, compared to a 33% year-on-year decrease on April 24. Therefore, Morgan Stanley expects investment banking revenue to perform better than expected in the second quarter of 2025, and management teams will likely note the building of project pipelines. In terms of trading, Morgan Stanley forecasts a strong 10% growth in stock market revenue in the second quarter of 2025. Industry exchange data supports the possibility of higher revenue, with over-the-counter trading volume increasing by 83% in April, 45% in May, and 80% in June. Plans to release excess capital Morgan Stanley estimates that large banks saw their excess capital increase by 26% after stress tests, from $156 billion to $197 billion, as the median stress buffer capital (SCB) for banks decreased by around 60 basis points. With this additional flexibility, Morgan Stanley expects management teams to optimize excess capital mainly by supporting client activities (such as increasing loans or returning capital to shareholders). With capital requirements lowered, investors' focus is on how quickly banks can optimize their balance sheets and identify opportunities for capital allocation. The upcoming quarterly earnings conference calls are expected to include discussions on capital priorities, the speed of capital return, and the latest updates on management buffer levels beyond regulatory minimum standards. Regarding the proposed enhanced supplementary leverage ratio (eSLR) revisions, Morgan Stanley expects banks that have previously been subject to leverage ratio restrictions (such as Goldman Sachs Group, Inc./State Street Corporation (STT.US)/New York TrustCo Bank Corp NY (BK.US)) to be questioned about whether they will be able to operate with less preferred shares in the future.