The investment banking business of the five major banks achieved a total revenue of 8.2 billion US dollars in the second quarter, an increase of 40% over the previous year. Morgan Stanley said it is now in the early stages of investment banking recovery.
The Wall Street investment banking business rebounded strongly in the second quarter, creating the best quarterly performance in two years.
The five major US banks Goldman Sachs, J.P. Morgan Chase, Morgan Stanley, Bank of America, and Citibank recently released second-quarter reports. Among them, the investment banking business achieved a total revenue of 8.2 billion US dollars, an increase of 40% over the previous year, reaching the highest level since the beginning of 2022.
It is worth mentioning that with the exception of Goldman Sachs, the investment banking business revenue of the other four major banks all exceeded market expectations, showing a general recovery trend in the industry.
Over the past three months, the stock price performance of the five major banks has been superior to that of the S&P 500 index. Analysts believe that this impressive performance not only reflects the recovery of the financial market, but also indicates that investment banks may be entering a new growth cycle.
The clear recovery of various business segments is optimistic about the investment banking business prospects
Specifically, various businesses have experienced varying degrees of recovery:
- Debt financing: The most outstanding performance. The debt underwriting revenue of the five major banks increased by more than 50% year-on-year to 3.7 billion US dollars. It is mainly due to corporate borrowers actively refinancing or adding new debt in the context of stabilizing interest rates. Investors' appetite for riskier deals is growing; for example, struggling Boeing successfully raised $10 billion at the end of April. Citi and Morgan Stanley performed best in debt trading, with revenue growth of about 90% and 70% year over year, respectively.
- Underwriting business: Revenue increased 36% to $1.8 billion. The Korean online comic platform Webtoon Entertainment was listed on the NASDAQ and raised 0.315 billion dollars, becoming one of the highlights of this quarter. J.P. Morgan and Goldman Sachs achieved revenue of 0.495 billion and 0.425 billion dollars respectively, leading the competition.
- M&A Advisory: Revenue increased 25% to $2.7 billion. Although the increase is relatively small, there are increasing signs of major mergers and acquisitions, such as ExxonMobil's $60 billion acquisition of Pioneer. Goldman Sachs accounted for 28% of the transaction value announced in the first half of 2024, a significant increase from 21% in the same period last year; Morgan Stanley followed suit, rising from 15% to 24%.
Major investment banks have expressed optimism about the future prospects of the investment banking business.
Morgan Stanley CFO Sharon Yeshaya said on Tuesday:
We anticipate that we are now in the early stages of recovery in the investment banking business, and differences between buyers and sellers over asset valuation are narrowing.
This is in line with Goldman Sachs's view. Goldman Sachs CEO Solomon said earlier in an earnings conference call that the company's backlog of investment banking business increased dramatically this quarter, and there is room for further recovery.
Morgan Stanley CEO Ted Pick's optimistic comments on investment banking business prospects helped reverse the impact on the bank's stock price due to mixed quarterly results. He stated:
I think we are in the early stages of growth led by the investment banking business, and we are very confident in this judgment.