Five bank shares: here’s my pick of the bunch
The global banking sector has already done well, but these industry titans have what it takes to do even better. Analyst Rodney Hobson also names his favourite play in the sector.
22nd October 2025 09:41
by Rodney Hobson from interactive investor
Quarterly results from American banks have generally confirmed the view that every investment portfolio should have at least one bank in it. Arguably, the best figures came this time from Morgan Stanley (NYSE:MS), the one that benefited most from a surge in the area of banking that potentially makes most money, deal making.
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Morgan Stanley recorded a 44% jump in fees from investment banking to $2.1 billion, much better than the 16% improvement at JPMorgan Chase & Co (NYSE:JPM) and just pipping the 42% upturn at The Goldman Sachs Group Inc (NYSE:GS) and 43% shown by Bank of America Corp (NYSE:BAC).
Morgan Stanley’s quarterly revenue of $18.2billion was a record for any quarter and was well clear of expectations. Also helping was a 25% increase in advisory revenue as more mergers and acquisitions were completed and a 36% rise in underwriting revenue as more client companies joined the stock market or issued convertible bonds.
In fact, sharply higher revenue was recorded across all parts of the business. Notable was a rise of 13% in revenue from wealth management, which is a particular target for the bank as it provides a steady source of income that offsets the more volatile trading and investment banking.
Net income soared 45% from the same quarter last year to $4.6 billion. No wonder the stock jumped 5% on the day the figures were released. The shares hit a new peak at $160 in September but despite the euphoria immediately after the results they have not managed to break that ceiling. Yet the price/earnings (PE) ratio is hardly demanding at 16.6 while the yield is solid at 2.3%. Not spectacular, but not bad for a company of this quality.
Source: interactive investor. Past performance is not a guide to future performance.
Bank of America results were also encouraging, if less spectacular. Revenue rose 11% to $28.1 billion and net income by 23% to $8.5 billion, thanks to strong growth in loans and deposits that made the consumer banking division the fastest growing part of the business.
The shares are sticking around the peak at $52, where the PE is 14 but the yield is only just over 2%.
Source: interactive investor. Past performance is not a guide to future performance.
Goldman Sachs raised its quarterly dividend from $3 to $4 after a strong performance in investment banking, and trading pushed net earnings up 37% to $4.1 billion in the three months to the end of September. Net revenue rose 20% to $15.2 billion.
Goldman shares briefly topped $800 last month then slipped a little to $750 but are on the rise again. At around $760 the PE is 15.5 but the yield is lower than for others in the sector at 1.7%.
Source: interactive investor. Past performance is not a guide to future performance.
JPMorgan Chase was another bank to beat expectations but its increase in revenue and profits was less spectacular than at its rivals. It also sounded a more downbeat note over “complex geopolitical conditions, tariffs and trade uncertainty, elevated asset prices and the risk of sticky inflation".
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For a full summary, see Keith Bowman’s analysis. The shares peaked at $318 but have eased a little to just under $300, where the PE is 15 and the yield is just under 2%.
Citigroup Inc (NYSE:C)and its record results were also analysed by Keith Bowman. Impressive though the figures were, the shares have also slipped back from the peak at $103 to around $99. The PE is 14 and the yield 2.3%.
Source: interactive investor. Past performance is not a guide to future performance.
While banks have seen their shares rise already, there should be more to come. The American economy has remained remarkably stable with low unemployment, moderate pay rises and a soaring stock market. Expectations are for one, just possibly two, further quarter point cuts in US interest rates that will provide a further economic boost that will offset any squeeze in the spread between borrowing and lending rates.
Hobson’s choice: All five shares covered in this article are buys at current levels. The pick of the bunch at the moment is Morgan Stanley.
Rodney Hobson is a freelance contributor and not a direct employee of interactive investor.
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