Jonathan Gray, President and Chief Operating Officer of Blackstone, from left, Ron O'Hanley, CEO of State Street Corp., Ted Beck, CEO of Morgan Stanley, Mark Rowan, CEO of Apollo Global Management. LLC, and David Solomon, CEO of Goldman Sachs Group Inc., during the Global Financial Leaders Investment Summit in Hong Kong, China, on Tuesday, November 19, 2024.
Paul Young | Bloomberg | Getty Images
US investment banks just reported a record quarter, helped by a surge in trading activity around the US election and a rebound in investment banking deal flow.
Traders in JPMorgan ChaseFor example, I've never had a better fourth-place finish a fourth After seeing revenues rise by 21% to $7 billion, while… Goldman Sachs The equity business generated $13.4 billion for the full year – also a record register.
to Wall StreetIt was a welcome return to the kind of environment that traders and bankers crave after a muted period when the Fed was on the back foot. Raising rates While grappling with inflation. Buoyed by the Federal Reserve's easing monetary policy and the election of Donald Trump in November, banks, including JP Morgan and Goldman Sachs, have begun… Morgan Stanley Topped easily Expectations For a quarter.
But the big mechanism that keeps Wall Street moving is starting to gain steam. That's because U.S. companies, deterred by regulatory uncertainty and rising borrowing costs, have mostly remained on the sidelines in recent years when it comes to buying rivals or selling themselves.
That's about to change, according to Morgan Stanley CEO Ted Beck. Buoyed by confidence in the business environment, including hopes for lower corporate taxes and smoother merger approvals, banks are seeing a growing backlog of merger deals, according to Beck & Goldman CEO David Solomon.
Beck said Thursday that Morgan Stanley's deals are “the strongest in 5 to 10 years, and probably longer.”
Capital markets activity, including debt and equity issuance, really started to recover last year, rising 25% from 2023 lows, according to Dealogic figures. But without normal levels of merger activity, the entire Wall Street ecosystem is missing a key driver of activity.
Multibillion-dollar acquisitions are at the “top of the waterfall” for investment banks like Morgan Stanley, Beck explained, because they are high-margin transactions that “have a ripple effect across the entire organization.”
This is because they create the need for other types of transactions, such as large loans, credit facilities, or stock issuances, while generating multi-million dollar fortunes for executives that need to be managed professionally.
“The final piece is what we've been waiting for, which is merger and acquisition tickets,” Beck said, referring to the contracts that govern merger deals. “We're excited to push that through to the rest of the investment bank.”
Another driver of value creation on Wall Street that has been sluggish in recent years is the IPO market — which is also set to rebound, Solomon said. He said An audience of technology investors and employees on Wednesday.
“There has been a huge shift in CEO confidence,” Solomon said earlier that day. “There is a significant backlog of sponsors and a general increase in appetite for deal making supported by an improved regulatory backdrop.”
After a lean few years, this should be a profitable time for dealmakers and traders on Wall Street.
