Big Bank Buybacks: Morgan Stanley, Citi, & Wells Fargo Lead

Key Points

• The banking sector is now pushing for some of the most aggressive buyback programs in the market, pointing to higher prices ahead in the space.
• Fundamentally, some of these names are primed for the continued breakouts in the stock market today.
• Analysts continue to expect double-digit upside in the coming months.

When investors look for some of the best indicators pointing to a stock moving higher in the short—to medium-term timeline, there aren’t many indicators as powerful as a company buying back its own stock in bulk. Stock buyback programs are a tax-free and efficient way to reward shareholders, unlike dividend payments or other methods commonly used in today’s market.

The primary benefit of buying back stock is that it increases the percentage ownership of all existing shareholders, without requiring any additional capital expenditure. The second effect is that the available number of shares also declines, which helps boost future earnings per share (EPS) figures.

This has a direct positive effect on the stock price and its valuation as a result.

It seems that today’s stock buyback announcements are focused on the financial sector, where some of the biggest banks have decided that the future looks brighter than it did in the past, expecting more profitability and higher prices as well.

This is a reason investors should keep an eye on stocks like Morgan Stanley NYSE: MS, Wells Fargo & Co. NYSE: WFC, and even Citigroup Inc. NYSE: C for future upside, also backed by the current fundamental state of the market.

Investment Banking Set to Take Off for Morgan Stanley

There are typically two types of banks in the industry, commercial and investment banks. Morgan Stanley belongs to the latter, where most of the bank’s earnings and fees come from brokering deals in the merger and acquisitions (M&A) space and sales and trading activities, both of which are set to take off in this current environment.

Trading fees and commissions are expected to increase due to the current rotations and volatility within the S&P 500 index. The potential for lower interest rates to be in place by the end of 2025 may create a more favorable financing environment, historically bullish for M&A deals to be completed.

Considering all these optimistic factors now in place for Morgan Stanley, it makes sense for management to approve a $20 billion stock buyback program as of July 2025, seeking to repurchase just under 10% of the bank’s market capitalization.

The 8% to 10% range is typically aggressive for those new to buybacks, so Morgan Stanley could have a big surprise under the hood ready to deliver results for current and prospective shareholders. Management isn’t the only participant who is optimistic about Morgan Stanley's stock.

As of mid-May 2025, institutional buyers from UBS Asset Management have decided to increase their holdings in Morgan Stanley stock by 4.8%, bringing their net position to a high of $1.1 billion today. This is another bullish factor for investors to consider in their potential buying thesis.

Earnings Wave Coming for Wells Fargo Stock

Wells Fargo management approved a stock buyback program worth up to $40 billion in the second quarter of 2025, confirming the broader view that banking stocks may be trading below their perceived value. This massive amount of buybacks carries a similar tailwind to those seen in Morgan Stanley, rooted in earnings.

However, Wells Fargo is more focused on the commercial banking industry, where most revenue and earnings come from products like mortgages and credit cards, among other banking solutions. Understanding that today’s credit cycle is likely bottoming and poised to surge again with potentially lower interest rates by the end of the year is the core.

The core for Wells Fargo’s future earnings wave, where Wall Street analysts now forecast to see up to $1.62 in earnings per share (EPS) for Wells Fargo in the fourth quarter of 2025, implying a net growth rate of as much as 17% from today’s reported $1.23 in EPS.

As most investors know, where EPS growth goes, so does the stock price, and this massive $40 billion buyback only comes to expand on that effect, potentially creating a new double-digit percentage upside for Wells Fargo stock moving forward.

Momentum Set to Continue in Citigroup

Not only is Citigroup now trading at a new 52-week high, but it is also aligning itself with the broader bull thesis being established for banking stocks. What’s different about Citigroup is that it's just as exposed to the investment banking side of things as it is to the commercial side, acting as a double-edged sword for investors to consider.

That might be one of the reasons why Richard Ramsden from Goldman Sachs decided to reiterate his Buy rating on Citigroup stock alongside a $96 per share valuation target, calling for a new 52-week high to be made alongside an additional 11% upside from where the stock trades today.

Considering its exposure to the broader industry tailwinds today, investors shouldn’t be surprised to see this momentum and expectation for Citigroup stock.

Furthermore, investors can note the $20 billion stock buyback program for Citigroup this year, which justifies and reinforces the upside these analysts projected and the momentum observed in the stock.