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Wall Street banks report improved investment banking fees

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Industry M&A volumes surged in Q3, ECM slightly ahead of

Q3 2023

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Bond issuance up strongly this year

Oct 15 (Reuters) - Wall Street's biggest banks reported

rising investment-banking fees in the third quarter fueled by

more deals and as companies increasingly issued debt, and said

that their pipeline of new activity looked healthy - although

some areas are slower to return.

Bankers are now more optimistic as they anticipate rate cuts

over the next few months by the Federal Reserve and central

banks across the world that would help grow the pipeline of

deals in the offing as borrowing becomes cheaper.

Easing interest rates, strong stock markets, and increased

US expectations of a soft economic landing have added to

dealmakers' confidence for a strong finish to the year.

Goldman Sachs ( GS ) said investment banking fees rose 20%,

driven by leveraged finance and investment-grade activity, and

equity underwriting. The bank's shares were up 3% premarket.

Goldman said its investment banking fees backlog increased

compared with both the end of the second quarter of 2024 and the

end of 2023.

"We are seeing increased client demand for committed

acquisition financing which we expect to continue on the back of

increasing M&A activity," Goldman's Chief Financial Officer

Denis Coleman said on a conference call with analysts.

Private equity players were getting more active,

Goldman's CEO David Solomon said, although were lagging

expectations.

"Sponsors (private equity firms) are slower to deploy

(capital) than we expected, but we do see more activity and it

will continue to accelerate over the next 6 to 24 months," said

Solomon. Solomon also said that there had been a lack of M&A by

large companies.

BofA's investment banking fees jumped 18% to $1.4 billion,

compared with a year earlier, bolstered by a rebound in activity

in recent months as improving confidence spurred clients to

issue debt and equity.

Bank of America's ( BAC ) Chief Financial Officer Alastair Borthwick

said on a media conference call that for investment banking, "we

feel good about our pipeline."

At Citi, investment banking was a bright spot for the second

straight quarter, with revenue up 31% driven largely by

investment grade debt issuance.

This results followed a strong showing by JPMorgan ( JPM )

on Friday, which posted a 31% surge in investment-banking fees,

doubling guidance of 15% in September. Equities propelled

trading revenue up 8%, exceeding an earlier 2% forecast.

Wells Fargo ( WFC ) said its non-interest income increased 12%,

driven partly helped by higher investment banking fees and

strong trading revenue.

"We've certainly seen a lot of activity in the investment

grade debt capital markets," Michael Santomassimo, Wells Fargo

CFO, told a media briefing on Friday.

"We've seen some activity in the leveraged finance business

as well, and there's a lot of activity or conversation on the

M&A side, but, it'll take some time for that likely to play

out."

Mergers and acquisitions announced worldwide in 2024 totaled

$909 billion as of Sept. 30 in the third quarter, up 22% from

$744.6 billion from same quarter a year earlier, Dealogic data

showed.

Candy giant Mars' $36 billion takeover of Cheez-It maker

Kellanova ( K ) and Blackstone's $16 billion buyout of

Australian data center operator AirTrunk ranked as the largest

deals of the quarter.

Citi served as a financial advisor to Mars, while J.P.

Morgan and Citi provided Mars with financing. Goldman Sachs ( GS ) is a

financial advisor to Kellanova ( K ).

U.S. investment-grade bond issuance so far this year at $1.3

trillion is 29% higher than the volumes in the year earlier

period, according to Informa Global Markets data.

"With the rates now beginning to decline as the Fed easing

cycle gets underway, we like the biggest banks that have a blend

of businesses that benefit from both fee and non-fee income,"

said Jon Curran, head of investment grade credit at Principal

Asset Management, ahead of Tuesday's slew of earnings.

Despite the optimism, dealmakers will be keenly watching the

U.S. elections and geopolitical situation as they add to

regulatory and other uncertainties.

"In light of the positive momentum throughout the year,

we're optimistic about our pipeline, but the M&A regulatory

environment and geopolitical situation are continued sources of

uncertainty," JP Morgan's finance chief Jeremy Barnum said.