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Wall Street says a Wall Street revival is finally here


Wall Street is surging again. This time, bank executives say it’s for real.

Bank of America (BAC), Goldman Sachs (GS), Citigroup (C), Morgan Stanley (MS) and JPMorgan Chase (JPM) all reported first-quarter jumps in investment banking.

They did so because initial public offerings, bond issuances and in some cases M&A deal making beat analyst expectations.

Collectively those revenues at the five big banks were up 26.6% from a year ago, to $8.08 billion. The biggest jump of 34% belonged to Bank of America, followed by 32% increases at Goldman and Citigroup.

CEOs are not hiding their enthusiasm for the turnaround, following two years of depressed dealmaking.

“The pipeline is clearly growing,” Morgan Stanley boss Ted Pick told analysts Tuesday, repeatedly using the world “bullish” to describe his outlook.

Wall Street is in the “early innings of a multi-year M&A cycle.”

Goldman CEO David Solomon said Monday that “it’s clear that we’re in the early stages of reopening the capital markets, adding that “I’ve said before that historically depressed levels of activity wouldn’t last forever.”

The investment banking rebound for these banks couldn’t have come at a better time, serving as a boost while higher interest rates begin to eat away at more traditional consumer banking margins.

Morgan Stanley's incoming CEO Ted Pick poses for a portrait in New York City, U.S., December 21, 2023. REUTERS/Jeenah Moon

Morgan Stanley CEO Ted Pick. REUTERS/Jeenah Moon (REUTERS / Reuters)

Wall Street has been waiting two years for this moment, enduring repeated false starts.

Last year was supposed to be the year things turned around as executives touted a string of IPOs and merger announcements. Instead, 2023 was the worst year for dealmaking in a decade, as clients turned cautious about everything from the direction of interest rates to relations with China to the larger US economy.

Investment banking revenue at the five big banks with sizable Wall Street operations fell by an average of 9% last year. The portion of these fees tied to advice given on mergers or acquisitions declined even more, by 21% on average.

Goldman Sachs CEO David Solomon testifies during a Wall Street oversight hearing by the Senate Banking, Housing, and Urban Affairs committee on Capitol Hill in Washington, DC, December 6, 2023. Large US banks railed against new proposed capital requirements at a congressional hearing on Wednesday, joining Senate Republicans in casting the measures as crimping loans to everyday Americans. (Photo by SAUL LOEB / AFP) (Photo by SAUL LOEB/AFP via Getty Images)

Goldman Sachs CEO David Solomon. (Photo by SAUL LOEB / AFP) (SAUL LOEB via Getty Images)

Some executives even had to walk back their talk of “green shoots” after the hoped-for surge in deals failed to materialize.

“We’ve grown tired of predicting” when investment banking will return, Bank of America CFO Alastair Borthwick said in October.

But this time CEOs are sounding more optimistic, citing the need for companies to grow or restructure following the pandemic along with mandates for private equity to return gains to their investors — known as limited partners (LPs).

“Corporate boardrooms have been quiet for three, four years and that is not sustainable,” Morgan Stanley’s Pick said. “They need to move.”

Limited partners that invested with private equity firms are “putting a lot of pressure on the financial sponsor community to return more capital,” Goldman’s Solomon added.

“And so I do think the pace is going to pick up in the coming quarters.”

Trading was another positive for the five big Wall Street banks in the first quarter, as that revenue rose nearly 1% from last year to $31.52 billion and exceeded analyst expectations.

Equities were stronger than fixed income. Only Goldman Sachs earned revenue from fixed-income trading that was higher from a year ago.

Jim DeMare, Head of Global Markets at Bank of America poses on the trading floor at the Bank of America Tower in Manhattan, New York City, New York, U.S., November 2, 2022. REUTERS/Andrew Kelly

Jim DeMare, head of global markets at Bank of America. REUTERS/Andrew Kelly (REUTERS / Reuters)

Bank executives are being more careful not to hype expectations for trading, given how difficult revenues for the business can be to predict.

But changing expectations for the US and global economy did increase client activity at these banks.

“I still think there’s uncertainty. You can’t predict the future and as a result, clients have to kind of adjust their portfolios,” Jim DeMare, Bank of America’s head of global markets, told Yahoo Finance.

“That results in more business and good activity for us,” he added.

David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance.

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