[Edaily Reporter Shin Ha-yeon ] Even amid this year’s artificial intelligence (AI) and big tech boom that has driven the U.S. stock market, financial stocks on Wall Street are continuing to show a quiet but steady rise. With improved earnings in investment banking (IB) and trading divisions, a recovery in the initial public offering (IPO) and mergers and acquisitions (M&A) markets, and aggressive shareholder return policies all converging, there is a growing trend of investor funds—previously concentrated on AI—spreading to financial stocks as well.
◇Wall Street Financial Stocks Smile Amid IPO and M&A Tailwinds
According to the financial investment industry on the 7th, JPMorgan Chase posted its best-ever quarterly earnings among U.S. banks, with second-quarter net income exceeding market expectations. Investment banking (IB) fees and the trading division drove the results, while Goldman Sachs delivered results that surpassed market expectations, buoyed by strong performance in investment banking and equity trading.
Morgan Stanley also posted strong results based on balanced growth across its investment banking, trading, and asset management divisions, while Bank of America (BofA) exceeded market expectations, driven by record-high performance in its Global Markets division and increased corporate finance fees.
Based on closing prices on the 6th (local time), Morgan Stanley posted the highest year-to-date stock price gain at 20.40%, while Goldman Sachs (17.47%), Bank of America (14.55%), and JPMorgan (10.58%) all continued to post gains of around double digits.
Reuters reported that investment banking fees for the six major U.S. banks rose by an average of 45% year-over-year in the second quarter of this year, noting that “Wall Street’s investment banking machine is firing on all cylinders.”
In fact, corporate finance fees have rebounded to their highest levels since the pandemic, driven by a series of mega-IPOs—including SpaceX’s—and major M&A deals. Global investment banking fees exceeded $60 billion in the first half of the year, with JPMorgan, Goldman Sachs, and Morgan Stanley topping the league tables.
Increased market volatility also proved beneficial for financial stocks. As investors traded more actively amid geopolitical risks in the Middle East, expanding AI investments, and uncertainty surrounding the interest rate path, revenue from equity and bond trading rose significantly. Goldman Sachs posted record-high earnings in its equity trading division in the second quarter, and JPMorgan also achieved the highest quarterly net income ever for a U.S. bank, driven by strong trading performance.
Despite the improved earnings, the fact that valuation pressures remain manageable has also stimulated investor sentiment toward financial stocks. Analysts note that, unlike AI-related tech stocks, which have risen sharply since the beginning of the year, financial stocks have seen relatively limited gains, making them a target for sector rotation among institutional investors. Active shareholder return policies, such as increased dividends and share buybacks, are also enhancing their investment appeal.
◇Shareholder Returns and Exchange Rate Effects… Expectations for a Revaluation in Korea as Well
Analysts suggest that domestic financial stocks also have ample potential for revaluation. While the proportion of investment banking (IB) operations is not as high as that of major U.S. financial stocks, factors such as a weaker exchange rate, improved capital ratios, and expanded shareholder returns could drive stock price gains.
Their attractive valuations are also coming into focus. According to Hana Securities, the expected price-to-book ratio (PBR) for domestic bank stocks this year is 0.69x, significantly lower than that of U.S. banks (1.72x) and European banks (1.58x).
While the KOSPI fell 22.15% over the past month (July 6–August 6), the KRX Banking Index rose 1.95%, performing relatively well. Looking at year-to-date returns, ShinhanFinancialGroup Co.,Ltd.(055550)(40.21%), HanaFinancialGroupInc.(086790)(42.72%), and KB Financial Group(105560)(39.09%) have all posted gains of around 40%, while WooriFinancialGroup(316140)(19.43%) has also risen by nearly 20%.
Choi Jeong-wook, an analyst at Hana Securities, said, “The decline in the won-dollar exchange rate is a factor that could raise expectations for increased shareholder returns, as it leads not only to foreign exchange gains but also to an improvement in the Common Equity Tier 1 (CET1) ratio,” adding, “Given the high stability of earnings and the favorable macroeconomic environment, it is necessary to continue increasing interest in bank stocks.”
He continued, “If the current exchange rate level is maintained, KB Financial Group, Woori Financial, and Hana Financial are expected to see their CET1 ratios rise by approximately 25–30 basis points (1 bp = 0.01 percentage point),” adding, “The positive impact of the exchange rate decline needs to be better reflected in bank stock prices.”
Jo Ah-hae, an analyst at Meritz Securities, noted, “Expectations for active shareholder returns driven by improvements in the CET-1 ratio, underpinned by the banks’ solid earnings fundamentals, remain valid,” and pointed out, “This is a time when their role as defensive stocks is coming to the fore amid increasing stock market volatility.”
