UK investors continue to pile into Lloyds‘ shares. It’s easy to see why – they look cheap and offer an attractive dividend. But I see more potential in other bank shares at the moment, especially after the $1.75trn SpaceX IPO.
A $500m payday
A lot of US banks are going to do very well out of the SpaceX IPO. According to CNBC, the 20-or-so institutions that underwrote it are going to pocket around $500m in fees.
Of this $500m, Goldman Sachs and Morgan Stanley – who were the lead underwriters – are going to receive around $100m each. JP Morgan (NYSE: JPM), Bank of America, and Citigroup will each get about $75m.
For some of these firms, the rewards will be significantly greater. Because when an IPO’s successful, lead underwriters often see a large chunk of institutional investor profits returned to them by way of ‘soft dollar’ commissions (commissions that exceed the cost of the trade executions).
According to economist Jay Ritter (aka ‘Mr IPO’), about 30% of first-day profits typically come back to the banks in soft dollars, with most of this going to the lead underwriter. So Goldman Sachs (the primary lead underwriter) and perhaps others like Morgan Stanley and JP Morgan could be set to see a nice revenue boost in the near term.
More IPOs on the way…
It’s worth noting that SpaceX isn’t likely to be the only blockbuster IPO this year. We could also see listings from Anthropic and OpenAI. These events could provide another boost for US bank revenues. Overall, it could be a big year for investment banking fees.
Multiple revenue drivers
It’s not just an investment banking story here however. Because banks such as Goldman Sachs, Morgan Stanley, and JP Morgan all have wealth management and/or trading divisions, it means they can make money from rising and/or volatile markets (these banks are far more diversified than Lloyds).
I’m backing this bank stock
Now, I think all three of these names are worth considering for a portfolio today. I believe it’s likely that all three will outperform Lloyds between now and the end of the year (and probably outperform next year too).
Of the three, the stock I’m backing with my own cash is JP Morgan. It may not have landed a lead underwriter role in the SpaceX IPO, but it has lots going for it.
For a start, it’s a huge player in wealth management with $4.3trn in assets under management. With markets near all-time highs, this area of the business is likely to be doing extremely well.
Second, it has large trading and investment banking divisions (it was the number-one player in global investment banking in 2025). These should also be performing well given the fact that markets are volatile and companies are raising money for growth.
The valuation also looks attractive. At present, the stock has a price-to-earnings (P/E) ratio of 14.6 versus 18.4 for Goldman Sachs and 18.8 for Morgan Stanley, so it’s a bit cheaper than the other two bank stocks. Finally, there’s a dividend yield of around 2%. So there’s a bit of income here too.
Of course, all bank stocks have their risks. One I’m monitoring here is white-collar job losses and associated mortgage stress.
Overall though, I like the set-up. The way I see it, this company has many ways to win.
Should you invest £5,000 in JPMorgan Chase right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if JPMorgan Chase made the list?
Edward Sheldon owns shares in JP Morgan
