JPMorgan: Investment banking rally likely to continue after US election
1min read Analysts at JPMorgan said in a recent report that it was reasonable for investment banking stocks to have rallied strongly after the US election, considering the potential for tax cuts, the expected delay in final Basel III regulations and further dilution, and expected investment banking activity, particularly M&A activity.JPMorgan analysts led by Kian Abouhossein wrote: "We believe this momentum will continue in the near term, supported by a good equity and credit trading environment so far in the fourth quarter."Overall, the firm maintains an "overweight" stance on the investment banking sector.However, while the finalisation of Basel III may be delayed and not as stringent as previous proposals, any relaxation of the rules compared to current regulations will take time to implement. They will not see any changes before the first half of 2025 or the second half of 2025.As Goldman and Morgan Stanley in the US have already priced in the upside related to this, JPMorgan analysts believe European banks have more upside potential.Abouhossein wrote that in the long term, "we prefer European investment banks that will also benefit from any potential improvement in client activity levels."Since November 5, Goldman's stock has traded at a multiple of 12.7 times earnings, and Morgan Stanley's at 15.6 times, compared to Deutsche Bank's 5.3 times, Barclays' 6 times, and even UBS' 10.7 times.Notably, Goldman and Morgan Stanley's shares have risen about 12% since November 5, outpacing the 2.9% rise in the S&P 500. In contrast, Deutsche Bank has fallen 3.7%, UBS has dropped 0.2%, and Barclays has risen slightly 0.8% over the same period.Barclays gets 31% of its group revenue from the US. Deutsche Bank gets 33% of its investment banking revenue and 17% of its group revenue from the US.JPMorgan's long-term global investment banking ranking is Deutsche Bank, UBS, Barclays, Goldman, Societe Generale, JPMorgan and BNP Paribas, Abouhossein and his colleagues said. "In Europe, we have moved our portfolio to higher non-interest income leverage investment banks through our preferred UBS, Deutsche Bank and Barclays."