Analyst sees European banks closing valuation gap with Wall Street giants Goldman and Morgan Stanley
Barclays PLC (LSE:BARC) has been named a top pick among global investment banks by JP Morgan.
It has upgraded its trading revenue forecasts across the sector after concluding that market volatility sparked by Middle East tensions will drive one of the strongest quarters for trading revenues on record.
Standard Chartered and HSBC also feature in JP Morgan's preferred list, ranked third and seventh respectively, as the bank argues that European investment banks are too cheaply valued relative to their Wall Street rivals to ignore.
Barclays and Deutsche Bank trade at 6.5 and 6.9 times 2027 estimated earnings, against 13.1 and 13.8 times for Morgan Stanley and Goldman Sachs, a discount JPM describes as too wide even after accounting for the stronger franchises of the US banks.
The upgrade to trading forecasts is driven by a surge in market activity that JP Morgan says was already running strongly before the latest geopolitical events, and has since accelerated as clients rush to hedge risk positions.
The US investment bank now forecasts first-quarter 2026 equities trading revenues up 19% year-on-year and fixed income, currencies and commodities revenues up 16%, putting total markets revenues 17% higher.
Investment banking fees, by contrast, have been trimmed to 22% growth for the quarter as deal pipelines face disruption from Middle East uncertainty and concerns around private credit markets.
A note of caution: JPM flags that the second half of 2026 sets a tough comparison given record trading in the same period last year, and forecasts markets revenues down 3% year-on-year in the second half.
European banks also face a currency headwind, with the dollar down around 11% against the euro and 7% against sterling year-to-date.