3 Investment Bank Stocks to Buy From a Flourishing Industry

The Zacks Investment Bank industry is set to benefit from clarity on trade and monetary policy, a resilient economy and lower financing costs, which will boost M&As and underwriting prospects. Trading revenues are likely to remain strong as lingering geopolitical risks and tariff concerns help sustain market volatility and client activity.

Meanwhile, rising investments in AI, technology and platforms may weigh on costs in the near term but are expected to enhance long-term operating efficiency. So, industry players like Morgan Stanley MS, Interactive Brokers Group, Inc. IBKR and Evercore Inc. EVR are worth considering to generate solid returns.

Industry Description

The Zacks Investment Bank industry consists of firms that provide financial products and services, including advisory-based financial transactions to corporations, governments and financial institutions worldwide. These started as partnership firms focused on initial public offerings (IPOs), secondary equity offerings, brokerage and mergers and acquisitions (M&As). Gradually, the companies have evolved into providers of various other services, including securities research, proprietary trading and investment management. Therefore, industry players work mainly through three product segments: investment banking (M&As, advisory services and securities underwriting), asset management and trading and principal investments (proprietary and brokerage trading).

Trends Shaping the Future of the Investment Bank Industry

Underwriting and Advisory Businesses Momentum to Persist: Following a prolonged slump in underwriting and IPOs as well as deal-making activity since 2022 due to geopolitical tensions and global macroeconomic uncertainty, advisory and underwriting businesses have rebounded, fueled by expectations of a strong investment banking rebound under a business-friendly Trump administration, with potential tax cuts and deregulation on the horizon. Further, greater clarity on trade and monetary policy directions acted as tailwinds.

The outlook and visibility on M&As and underwriting operations are encouraging, driven by a resilient economy, declining financing costs and renewed corporate confidence. Yet, the ongoing Middle East conflict may weigh on it to some extent. This evolving macro backdrop is setting the stage for continuous top-line growth for investment banks.

Trading Business to Remain Solid: Client activity in the trading business largely depends on the prevalent macroeconomic and geopolitical conditions. Since 2022, market volatility has increased significantly, largely due to several geopolitical and macroeconomic challenges. Further, President Donald Trump’s tariff plans have upended the near-term normalization of trading business. Market volatility and client activities have soared, and trading desks will likely continue to witness a flurry of activity. Hence, investment banks are expected to record solid trading income in the upcoming period.

Technology to Improve Operating Efficiency: Innovative trading platforms, the use of AI and investments in technology and advertising will likely support the operations of investment banks. Industry players are attracting and retaining the best talent for building a leadership team and spending heavily on technology to support clients with infrastructure development and new platforms. While industry players are likely to face increasing technology-related expenses in the near term, these initiatives are expected to improve operating efficiency over time.

Zacks Industry Rank Indicates Bullish Prospects

The Zacks Investment Bank industry is a 21-stock group within the broader Zacks Finance sector. The industry currently carries a Zacks Industry Rank #29, which places it in the top 12% of more than 240 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates solid near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a robust earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gaining confidence in this group’s earnings growth potential. Over the past year, the industry’s earnings estimates for 2026 have been revised upward by 7.1%.

Before we present a few stocks that you may want to buy, let’s take a look at the industry’s recent stock market performance and valuation picture.

Industry's Stock Market Performance Is Impressive

The Zacks Investment Bank industry has outperformed its sector and the S&P 500 over the past year. While stocks in the industry have collectively gained 22.8%, the S&P 500 composite has rallied 21.5%, and the Zacks Finance sector has risen 8%.

One-Year Price Performance

Industry's Valuation is Attractive

One might get a good sense of the industry’s relative valuation by looking at its price-to-tangible book ratio (P/TBV), commonly used for valuing investment banks because of significant variations in their results from one quarter to the next.

The industry currently has a trailing 12-month P/TBV of 2.83X, above the median level of 2.23X over the past five years. The industry is trading at a considerable discount compared with the market at large, as the trailing 12-month P/TBV ratio for the S&P 500 is 11.36X and the median level is 13.49X.

Price-to-Tangible Book Ratio (TTM)

Finance stocks typically have a lower P/TBV ratio, so comparing investment banks with the S&P 500 may not make sense to many investors. However, comparing the group’s P/TBV ratio with that of the broader sector ensures that the group is trading at a decent discount. The Zacks Finance sector’s trailing 12-month P/TBV of 39.97X and the median level of 4.77X for the same period are above the Zacks Investment Bank industry’s respective ratios.

Price-to-Tangible Book Ratio (TTM)

3 Investment Banks to Buy Now

Morgan Stanley: This Zacks Rank #2 (Buy) stock operates globally as an investment banking, securities and investment management company. Based in New York, the key source of Morgan Stanley’s earnings stability is its business diversification initiatives. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Morgan Stanley is taking steps to boost stable revenue, shifting from reliance on capital markets. Acquisitions of Eaton Vance, E*Trade and Shareworks support this strategy. In January, it acquired EquityZen to tap the rapidly growing private markets landscape. These moves bolster the company’s diversification efforts, enhance stability and create a more balanced revenue stream across market cycles.

MS’ partnership with Mitsubishi UFJ Financial Group, Inc. will likely continue to support its profitability. In 2023, the companies announced plans to deepen their 15-year alliance by merging certain operations within their Japanese brokerage joint ventures. The move strengthens Morgan Stanley’s foothold in Japan.

A favorable macroeconomic backdrop is expected to support the company’s IB business, further strengthening its top line. The demand for both advisory and underwriting businesses is likely to rise as corporates become more comfortable with the current economic backdrop.

With a market cap of $245.9 billion, MS is expected to continue benefiting from its scale and business expansion efforts. Its shares have jumped 31.8% in the past year. The Zacks Consensus Estimate for 2026 and 2027 earnings implies a year-over-year rise of 8.9% and 7.1%, respectively.

Price and Consensus: MS

Interactive Brokers: IBKR, sporting a Zacks Rank #1, is a well-known fintech broker. The company’s biggest strength stems from its deep, multi-asset global market access, unmatched by most retail and even many institutionally focused competitors. The company enables clients to trade across more than 160 markets, dozens of currencies and a wide range of asset classes, including equities, options, futures, foreign exchange, bonds and funds, from a single unified platform.

Another strong aspect of IBKR is technological superiority. This has kept the company’s compensation expense relative to net revenues (10.1% in 2025) below its industry peers. It has been emphasizing developing proprietary software to automate broker-dealer functions, leading to a steady rise in revenues.

Interactive Brokers is expanding with a series of strategic moves. This year, the company expanded its offerings by adding stablecoin funding, launching Coinbase Derivatives, LLC, and enabling global futures, options and portfolio lending for Swedish clients through ISK accounts. In 2025, it rolled out several products and services, the notable ones being the Karta Visa card, the Connections discovery feature, zero-commission U.S. stock trading in Singapore, Brazil, UAE, Malaysia and Taiwan and NISA accounts for Japan. It extended Forecast Contracts trading to nearly 24 hours and launched a prediction markets hub in Canada. These and several other initiatives are expected to strengthen Interactive Brokers’ market share amid stiff competition and help diversify operations.

The company’s technological superiority, combined with easier regulations to improve product velocity, will support its net revenues through higher client acquisitions. Net revenues are also expected to strengthen further in the quarters ahead, given the solid Daily Average Revenue Trades numbers and robust trading backdrop driven by higher market participation.

With a market cap of $112.3 billion, Interactive Brokers is expected to continue benefiting from its business expansion efforts and favorable operating environment. Its shares have soared 58.2% over the past 12 months. The Zacks Consensus Estimate for 2026 and 2027 earnings indicates an increase of 7.3% and 6.7%, respectively, on a year-over-year basis.

Price and Consensus: IBKR

Evercore: This Zacks Rank #2 is a leading independent advisory boutique, built around high-margin M&A and restructuring advice with a leaner balance sheet profile. The company generates most of its revenues from the Investment Banking and Equities business (which constituted 97% of total revenues in 2025). After subdued activity in 2022 and 2023, global M&As improved in 2024 and 2025 as both deal value and volume rose.

Looking ahead, transaction activity is expected to strengthen, supported by lower borrowing costs and increased focus on scale and AI integration. Investment Banking and Equities business witnessed a compound annual growth rate (CAGR) of 10.7% over the past five years (2020-2025).

Evercore is strengthening its IB business footprint by actively increasing staff. As of Dec. 31, 2025, the company employed more than 200 senior managing directors in the Investment Banking & Equities business. In February, the company acquired U.K.-based independent advisory firm, Robey Warshaw. This will bolster the company’s presence across EMEA and broaden its sector and product coverage. EVR’s efforts to boost its client base in advisory solutions, diversify revenue sources and expand geographically will likely support IB revenue growth.

A small portion of Evercore’s business is wealth management. Though the division’s profitability has been hurt in recent years due to the disposal and restructuring of several related units, decent inflows, upbeat market performance and higher fees from clients are expected to offer some support.

EVR has a market cap of $10.6 billion. Over the past year, shares of the company have surged 35.2%. The Zacks Consensus Estimate for earnings implies 27.2% and 25.2% year-over-year improvement for 2026 and 2027, respectively.

Price and Consensus: EVR

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the favorite stock to gain +100% or more in the months ahead. They include

Stock #1: A Disruptive Force with Notable Growth and Resilience

Stock #2: Bullish Signs Signaling to Buy the Dip

Stock #3: One of the Most Compelling Investments in the Market

Stock #4: Leader In a Red-Hot Industry Poised for Growth

Stock #5: Modern Omni-Channel Platform Coiled to Spring

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Morgan Stanley (MS): Free Stock Analysis Report

Interactive Brokers Group, Inc. (IBKR): Free Stock Analysis Report

Evercore Inc (EVR): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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