In this article, American investment banks have recently reported a record-breaking quarter, driven by increased trading activity surrounding the U.S. election and a rise in investment banking transactions. For example, JPMorgan Chase traders experienced their best fourth quarter ever, with revenue climbing by 21% to $7 billion. Similarly, Goldman Sachs’ equities business achieved a record $13.4 billion in revenue for the year.
The return to a favorable trading and banking environment on Wall Street was welcomed after a period of subdued activity during the Federal Reserve’s rate hikes to combat inflation. With the Fed adopting an easing stance and the election of Donald Trump in November, banks such as JPMorgan, Goldman, and Morgan Stanley surpassed quarterly expectations.
The momentum on Wall Street is gaining traction as U.S. corporations, previously hesitant due to regulatory uncertainties and higher borrowing costs, are now showing interest in acquisitions and mergers. Morgan Stanley CEO Ted Pick anticipates a shift in the business landscape, driven by optimism for lower corporate taxes and smoother merger approvals, leading to a surge in merger deals.
According to Pick and Goldman CEO David Solomon, banks are witnessing a growing backlog of merger transactions, with Morgan Stanley’s deal pipeline being the strongest in years. Capital markets activities, including debt and equity issuance, have been recovering, but the absence of significant merger activity has been a missing element in the Wall Street ecosystem.
Large-scale acquisitions play a crucial role for investment banks like Morgan Stanley, as they generate high margins and trigger a chain of related transactions such as loans, credit facilities, and stock issuance. The anticipation of increased merger deals is expected to boost the overall performance of the investment bank.
Following Goldman’s recent results, veteran Morgan Stanley banking analyst Betsy Graseck raised her earnings forecast for the bank in 2025 by 9%, emphasizing the potential for continued growth in capital markets and investment banking activities throughout the year.
Another area of value creation for Wall Street, the IPO market, is also poised for a revival, as highlighted by Solomon to a tech-focused audience. The CEO noted a shift in CEO confidence and a growing appetite for deal-making, supported by a more favorable regulatory environment.
After a period of sluggish activity, the resurgence in mergers, acquisitions, and IPOs is expected to drive profitability for Wall Street’s financial professionals.
