5 Must-Buy Investment Bank Behemoths on a Positive Industry Scenario

The investment banking industry has shown significant strength, gaining 41.5% over the past year and 21.4% year-to-date, buoyed by increased client activity, a rebound in underwriting and advisory businesses, and widespread AI adoption. This positive momentum, placing the industry in the top 4% of Zacks Industry Rank, is projected to drive continued market outperformance. Consequently, Goldman Sachs, JPMorgan Chase, Citigroup, Evercore, and Interactive Brokers are highlighted as "Strong Buy" recommendations, each exhibiting robust growth drivers, strategic expansions, and favorable analyst estimate revisions for 2025 and 2026.

Analysis

The investment banking sector is exhibiting significant strength and is positioned for continued outperformance, with the Zacks-defined industry gaining 41.5% in the past year and ranking in the top 4% of all industries. This momentum is fueled by a rebound in advisory and underwriting activity, robust client engagement, and the strategic implementation of AI to enhance long-term efficiency. Among the top-rated firms, distinct strategic drivers are apparent. Goldman Sachs (GS) is capitalizing on its dominant M&A franchise and refocusing on core banking and trading, with consensus estimates pointing to 12.6% EPS growth in 2025. Citigroup (C) is executing a significant transformation, exiting non-core businesses and expanding into private credit, which is reflected in strong upward earnings revisions and a projected 27.4% EPS increase for 2025. Evercore (EVR) demonstrates the most aggressive growth profile, with forecasts for 31.7% EPS growth in 2025 accelerating to 50.8% in 2026, supported by an expanding advisory base and substantial capital returns, including a $1.6 billion share repurchase program. Meanwhile, JPMorgan (JPM) leverages its scale and a formidable $18 billion technology budget to drive efficiency, though it faces a flat near-term outlook with a projected 1.3% EPS decline in 2025 before returning to growth. Interactive Brokers (IBKR) continues its global expansion and technology-led strategy, projecting an 11.4% increase in 2025 EPS.

Key Decisions for Investors

• Given the investment banking industry's top-tier ranking and 41.5% year-over-year return, investors should consider an overweight allocation to the sector to capitalize on its expected market outperformance.
• For exposure to high-growth turnaround stories, focus on Citigroup and Evercore, which are forecast to deliver exceptional EPS growth of over 27% and 31% respectively in 2025, driven by strategic restructuring and advisory strength.
• Investors prioritizing capital returns should note the recent dividend hikes and buyback programs at Goldman Sachs, Citigroup, and Evercore, which signal strong balance sheets and management confidence following the 2025 Fed stress tests.
• While the M&A outlook is positive, monitor macroeconomic indicators and geopolitical developments, as deal activity has shown sensitivity to events like new tariff announcements.