Morgan Stanley (MS) and Bank of America (BAC) have reported their first quarter earnings, surpassing expectations on both the top and bottom lines. Bank of America posted revenue of $25.82 billion, exceeding estimates of $25.61 billion. Similarly, Morgan Stanley reported revenue of $15.14 billion, outperforming the $14.46 billion estimate.

According to Stephen Biggar, the Director of Financial Services Research at Argus Research, a notable theme in these earnings results is the "resurgence in capital markets," particularly in the areas of wealth management, investment banking, and trading. Biggar highlights the banks' capital markets-related businesses, stating that they are performing well. However, he acknowledges that the lending business and net interest income have faced some challenges.

Biggar further explains that investment banking is experiencing a durable upturn, with advisory revenues especially expected to gather speed in the latter quarters of this year. The strong first quarter in announced deals sets up a positive revenue pipeline, with banks reaping the financial benefits once the deals close later this year or even early next year.

In addition, Biggar mentions that private market sponsors are sitting on a significant amount of assets and are likely to unload them to generate returns for their investors. This could occur through either going public or privately transferring assets to other investors. With IPO activity surging in the first quarter and promising dialogue with prospects, there is pent-up demand in the market after two years of sluggish activity. The current record market valuations also present a favorable environment for private-to-public conversions.

Looking forward, Biggar believes the resurgence in capital markets will continue, providing a positive outlook for the current quarter and beyond. The strength in investment banking and the expected increase in advisory revenues support this viewpoint.

Morgan Stanley's stock rose by over 3% in response to the earnings report, while Bank of America's stock reversed its earlier gains and fell by about 4% during trading.

Overall, the Q1 earnings results for Morgan Stanley and Bank of America highlight the strong performance of their capital markets-related businesses, while also acknowledging some challenges in the lending sector. The outlook for investment banking remains positive, with expectations of increased advisory revenues in the coming quarters.