Wall Street banks see deal activity picking up, even after record results

US investment banks just reported a record quarter, helped by a surge in trading activity around the US election and a pick-up in investment banking business flow.

The merchants at JPMorgan Chasefor example, they never had a better quarter fourth after seeing revenue 21% to $ 7 billion, while Goldman Sachs the stock business generated $13.4 billion for the full year — even a record.

In order Wall Streetit was a welcome return to the kind of environment desired by traders and bankers after a quiet period when the Federal Reserve was raise taxes while dealing with inflation. Driven by an easing Fed and the election of Donald Trump in November, banks including JPMorgan, Goldman and Morgan Stanley easily overcome expectations for the fourth.

But the great machine that keeps Wall Street moving is just picking up steam. That’s because, deterred by regulatory uncertainty and higher borrowing costs, American corporations have mostly sat on the sidelines in recent years when it came to buying competitors or selling them.

That’s about to change, second Morgan Stanley CEO Ted Pick. Buoyed by confidence in the business environment, including hopes for lower corporate rates and smoother approvals on mergers, banks are seeing growing delays in merger deals, according to Pick and Goldman CEO David Solomon.

The Morgan Stanley deal is “the strongest it’s been in 5 to 10 years, maybe even longer,” Pick said Thursday.

Capital markets activity, including debt and equity issuance, had already begun to recover last year, rising 25% from the depressed levels of 2023, according to Dealogic figures. But without normal levels of merger activity, the entire Wall Street ecosystem has been missing a key driver of activity.

Multibillion-dollar acquisitions are at “the top of the waterfall” for investment banks like Morgan Stanley, Pick explained, because they are high-margin transactions that “have a multiplier effect throughout the organization “.

It is because they create the need for other types of transactions, such as massive loans, credit facilities or share issuance, while generating millions of dollars in wealth for managers that must be managed professionally.

“The last piece is what we’ve been waiting for, which are the M&A tickets,” Pick said, referring to the contracts that govern the merger agreements. “We’re excited to push this to the rest of the investment bank.”

Another driver of value creation for Wall Street that has been sluggish in recent years is the IPO market — which is also set to pick up, Solomon said. said an audience of technology investors and employees on Wednesday.

“There has been a significant shift in CEO confidence,” Solomon said earlier that day. “There is significant backlog from sponsors and a general increased appetite for business creation supported by an improving regulatory background.”

After a few lean years, it should make for a profitable time for traders and Wall Street traders.