Wall Street investment banking revenues poised to exceed $9 billion

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Investment banking revenue at Wall Street’s largest banks is expected to exceed $9 billion in the third quarter for the first time since 2021, as dealmaking finally shows signs of booming under the Trump administration.

Analysts expect quarterly revenue reported this week from advisory, equity and debt underwriting work at JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley to total $9.1 billion, according to estimates compiled by Bloomberg.

That would represent a 13 percent increase from last year, and a 50 percent improvement from the 2023 lows, though still far short of the $13.4 billion that banks withdrew during the final quarter of the 2021 boom.

The third-quarter outlook reflects growing optimism on Wall Street that the increase in new corporate acquisitions, leveraged buyouts, and stock market listings, which were predicted after Donald Trump’s return to the White House, may now bear fruit.

Investment banking services Fees have fallen since the Federal Reserve began raising interest rates in early 2022, while the Biden administration’s restrictive antitrust policies have created a chilling effect on mergers.

Although bankers expected Trump’s return to office in January to unleash a boom, trade policy uncertainty and deep government cuts hampered dealmaking in the first part of the year.

It happened It has faded in recent monthsWhich adds to optimism that the improvement in investment banking’s fortunes may finally be paying off. Dealmakers see the Trump administration as more willing to approve deals and allow further industry consolidation.

A “pro-growth” environment and light regulatory touch are boosting sentiment, said Jason Goldberg, a banking analyst at Barclays, adding: “And what’s happening with AI, whether that’s needing investment or adaptation, is certainly contributing as well.”

Recently announced Acquisition of Electronic Arts for $55 billion That’s a symbol of a pickup in activity, even if the banks that worked on the deal — JPMorgan and Goldman — won’t collect most of their fees until the deal eventually closes.

The banks’ business has picked up the slack during the downturn in consulting work. After a period of lackluster returns in 2010, the trading units generated consistently higher revenues during five years of increased market volatility.

Analysts had expected volatility – and trading returns – to stabilize. However, they expect equity and fixed income trading across the five banks in the third quarter to be about 8 percent higher than a year earlier at nearly $31 billion.

“Trading activity… has held up better than we thought following the kind of stabilization the market experienced after Deregulation Day earlier this year,” said Scott Sievers, a senior analyst at Piper Sandler.

Quarterly net income in the top six American banks Total assets by assets – which includes the five investment banks and Wells Fargo – are expected to rise about 8 percent from the previous year. JPMorgan, Goldman, Citi and Wells will report their results on Tuesday, followed by Morgan Stanley and Bank of America on Wednesday.

“Banks have become just a vehicle through which investors can express their view on the health of the macro economy or interest rates,” Sievers said. “Both seemed to be in very good condition, and so the inventors were drawn to the group.”

Banks noted relative calm over the health of US borrowers despite rising interest rates. The four big lenders — JPMorgan, Bank of America, Wells and Citi — are expected to collectively set aside about $8 billion for potential loan losses, which would be roughly unchanged from the previous year.

However, analysts said the results will be carefully examined for signs of weakness in American households.

“Consumer will definitely be an area of ​​focus. There have been a lot of mixed trends in consumer numbers,” said Gerard Cassidy, banking research analyst at RBC Capital Markets.

The last Tricolor Mortgage Auto Bank Collapsefacing fraud allegations, has also raised concerns about the financial health of low-income Americans.

“There will be greater scrutiny or focus on credit quality in light of the recent news we’ve seen from companies like Tricolor and First Brands,” Baird senior analyst David George said. “Needless to say, this will I’m sure be very focused.”