Major US banks are set to benefit from the "re-emergence" of capital markets as increased equities trading activity is anticipated to drive investment banking revenue above management expectations, Morgan Stanley said in a Thursday note.

Initial public offerings and M&A "accelerated sharply" in May and June after investment banking deals slowed down in April, the investment firm said. This is expected to buoy Q2 investment banking revenues, according to the note.

In addition, major banks now have lower capital requirements after the stress test last week, freeing up excess capital, Morgan Stanley said. Banks are expected to optimize this excess capital through shareholder returns and management buffers, among others, the investment firm added.

Morgan Stanley raised its price targets for Goldman Sachs (GS) to $680 from $592; JPMorgan (JPM) to $296 from $240; Citigroup (C) to $103 from $94; Regions Financial (RF) to $27 from $22; PNC Financial Services (PNC) to $179 from $178; US Bancorp (USB) to $51 from $50, and Truist Financial (TFC) to $47 from $43.