Dealmaking revival lifts investment banking revenues above $9bn
Wall Street’s biggest banks are set to report their strongest investment banking quarter in nearly four years, with revenues expected to surpass $9 billion for the first time since 2021 amid signs of a sustained rebound in dealmaking.
Analysts forecast that combined advisory and underwriting revenues across JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup will reach about $9.1 billion for the third quarter, according to Bloomberg estimates.
That marks a 13 per cent increase from a year ago and a 50 per cent rise from the lows of 2023, though still well below the $13.4 billion peak during the post-pandemic boom.
Optimism returns under Trump administration
The recovery follows a long slump in mergers, buyouts and stock listings that began when the Federal Reserve raised interest rates in 2022 and the Biden administration adopted tougher antitrust policies. Bankers say the return of Donald Trump to the White House has shifted sentiment, with the new administration seen as more business-friendly and supportive of corporate consolidation.
Jason Goldberg, a banking analyst at Barclays, said the “pro-growth” policy environment and lighter regulatory approach were helping confidence return to Wall Street.
“And what’s going on with AI – whether it’s the need to invest or adapt – is certainly contributing as well,” he added.
Among recent deals, the $55 billion leveraged buyout of gaming giant Electronic Arts has become emblematic of the revival in activity, even though banks like JPMorgan and Goldman Sachs will not collect most of their fees until completion.
Trading units remain strong
While advisory revenues recover, trading desks continue to underpin profits. Analysts expect combined equities and fixed-income trading revenue across the five banks to rise about 8 per cent year-on-year to nearly $31 billion, defying predictions that market volatility would subside after the start of the year.
“Trading activity has hung on better than we would have thought following the market sort of settling after ‘liberation day’ earlier this year,” said Scott Siefers, senior analyst at Piper Sandler.
Profits rise amid steady credit outlook
Total quarterly net income at the six largest US banks – including Wells Fargo – is expected to rise about 8 per cent from last year. JPMorgan, Citi, Goldman Sachs and Wells Fargo will report results on Tuesday, with Morgan Stanley and Bank of America following on Wednesday.
Analysts will watch for signs of strain among consumers as banks continue to navigate high borrowing costs. The four largest lenders are expected to set aside roughly $8 billion for potential loan losses, about the same as last year.
“There’s been a lot of mixed trends in the consumer numbers,” said Gerard Cassidy of RBC Capital Markets, noting that recent turmoil at subprime auto lender Tricolor has heightened scrutiny of household debt.
Still, sentiment across Wall Street remains buoyant. “Banks have become a way for investors to express a view on the economy and interest rates,” said Siefers.
“Both look relatively healthy – and that’s drawing money back into the sector.”
