At the bustling Global Financial Leaders’ Investment Summit in Hong Kong, notable figures such as Jonathan Gray from Blackstone, State Street’s Ron O’Hanley, Ted Pick of Morgan Stanley, Apollo’s Marc Rowan, and David Solomon from Goldman Sachs gathered on November 19, 2024, to share insights and forecasts.
Investment banks in the U.S. are riding high after unveiling a quarter filled with unprecedented success, fueled by a surge in trading spurred by the U.S. election and an uptick in deal-making within investment banking. Notably, JPMorgan Chase shook up the industry with a remarkable 21% revenue jump, hitting $7 billion, marking their best-ever fourth quarter. Meanwhile, Goldman Sachs saw its equities business skyrocket to an annual total of $13.4 billion, another record-breaker.
For Wall Street, these results signal a return to favorable conditions much awaited by traders and bankers who had seen quieter times during the Federal Reserve’s rate hikes to manage inflation. The Federal Reserve’s easing stance and Donald Trump’s election in November have boosted expectations, allowing heavyweights like JPMorgan, Goldman, and Morgan Stanley to easily surpass quarterly forecasts.
However, the real momentum on Wall Street is just building up steam. Due to earlier apprehensions over regulatory unpredictability and climbing borrowing costs, U.S. companies have largely stayed out of major acquisitions or sales. That’s set to change. Ted Pick, CEO of Morgan Stanley, is optimistic, citing increased confidence in the business climate, anticipation of reduced corporate tax rates, and smoother merger approvals as factors prompting banks to see a swelling backlog of merger deals. Both he and Goldman CEO David Solomon highlight the upswing in pending deals.
Pick shared that Morgan Stanley’s deal pipeline is possibly the strongest it’s been in over a decade.
Expectations are rising in capital markets, with debt and equity issuance already showing a 25% recovery from 2023’s lows, according to Dealogic. However, the absence of merger transactions has left Wall Street missing a critical revenue stream. As Pick explains, large acquisitions drive substantial activity for investment banks like Morgan Stanley. These high-margin transactions trigger a cascade of other financial engagements, including extensive loans and stock issuances, along with substantial wealth that demands professional management.
“We’ve been waiting for the surge of M&A tickets,” Pick said, anticipating their spread across the investment banking sector. Following Goldman’s robust results, Morgan Stanley’s banking analyst Betsy Graseck even boosted her 2025 earnings forecast for the bank by 9%.
Graseck remains bullish on capital markets, mentioning in her note, “We’re emphasizing the rebound theme, expecting ongoing earnings surprises as trading and investment banking pick up.”
In the realm of initial public offerings (IPOs), which have been sluggish in recent years, there is newfound optimism. Speaking to tech investors and staff, Solomon noted that CEO confidence is on the rise. He explained there’s a substantial queue of sponsors eager to make deals, encouraged by an improving regulatory environment.
As these conditions take hold, Wall Street’s dealmakers and traders are poised for a prosperous future, hoping to capitalize on these moves in the market.
Don’t miss: “Goldman Sachs tops estimates on strong trading results.”
