Eyes on Bank of America and Morgan Stanley as IPO Activity Heats Up

Bank of America BAC management presented on Monday at the Barclays Global Financial Services Conference, reiterated its net interest income (NII) guidance for the year, and was generally upbeat about its prospects across its Consumer Bank, Wealth Management and Global Banking segments.

In many respects, the presentation was a bit of a commercial from BofA’s upcoming Investor Day on November 5, its first in more than a decade. While we appreciate the management team's comments, it’s also not lost on us the growing track record of besting EPS consensus expectations. For now, we’ll keep our $55 price target for BAC shares intact, but subject to the pace of investment banking activity over the next few weeks, we may need to adjust that target as well as the current $150 one for Morgan Stanley MS shares.

BofA at the Barclays Conference

When asked about why the company is having an Investor Day after so long, we can trace the answer back to management looking to help the investment community get a better handle on the prospects for those three operating segments, but also how BofA can drive overall growth by cross-leveraging those segments. We are looking forward to that event, and what the team has to say about it, and plans to further develop its payments business.

During the conference presentation, BofA shared that it is examining developing its own stablecoin as well as working with an industry consortium, like it did with Zelle.

One interesting factoid shared was that the company’s payments through Zelle are larger than its combined cash and checks activity, which is a nice data point for our Digital Payments investing theme. Getting back to the stablecoins topic, BofA’s question is how its use will stack up against the use of cash, checks, wire and ACH payments, and the combination of credit, debit and mobile payments. While low-value cross-border payments are a potential venue, one that would compete with PayPal’s PYPL Venmo, Western Union WU, MoneyGram, Wise, Remitly and others, the question is how mainstream that adoption could be. That's TBD, and that means we’ll continue to track it.

In terms of the current quarter, BofA shared that it continues to benefit from core organic growth for both loans and deposits growth as it continues to cross-market across its reporting segments. Based on the data it tracks, it hasn’t seen the consumer weaken and noted that consumer spending has accelerated compared to last year. Comments from others at the Barclays conference on Tuesday and Wednesday should shed more light on that.

BofA also sees its investment banking up 10% to 15%, but noted that, subject to activity in the next few weeks, there could be some upside.

The Near-Term IPO Market

Over the last few weeks, we’ve discussed the potential for activity in the IPO market to bounce back following a relatively quiet August. Deals expected to price in the very near-term are Klarna Group KLAR, cryptocurrency exchange Gemini Space Station (GEMI), WaterBridge Infrastructure, and Zenta Group (ZGM).

Also on tap are building engineering and maintenance firm Legence LGN, blockchain lending platform Figure (FIGR), public transit software services provider Via Transportation (VIA) and Black Rock Coffee (BRCB). Other offerings on the horizon are expected to price next week, including cybersecurity company Netskope (NTSK) and StubHub (STUB).

As each of these offerings is priced, we’ll review the final terms against the expected ranges and what that means for our positions in MS and BAC shares. For the deals listed above, Morgan Stanley is a lead underwriter in the BRCB, KLAR, VIA and NTSK offerings, while BofA is a lead underwriter in the FIGR one as well as a co-manager for STUB.

As a reminder, how those deals perform will determine the pace of IPO activity to come, including expected ones from Canva and Databricks. While we track that development, we’ll also keep an eye on M&A activity.

The pace has been brisk this year, but Goldman Sachs GS sees a better year ahead in 2026 with global M&A reaching $3.9 trillion in 2026, which would eclipse the $3.6 trillion record set in 2021. That’s quite a forecast with 16 months to go, but one that, if it proves out, means we may need to revisit our BAC and MS price targets more than once, especially if the IPO market continues to hum.

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At the time of publication, TheStreet Pro Portfolio was long BAC and MS.