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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 corporate debt issuance, and said their pipeline

of new activity looked healthy, although some areas are slower

to rebound.

Bankers are growing optimistic Federal Reserve and other

central bank rate cuts in coming months will boost the pipeline

of deals as borrowing becomes cheaper. Buoyant stock markets and

increased expectations of a soft U.S. economic landing are also

boosting dealmakers' confidence the year will finish on a high,

executives said.

"The big banks have been beating estimates with help

from investment banking revenue which is a big diversifier and

advantage compared to smaller or mid-sized banks," said Dave

Ellison, a portfolio manager at Hennessy Funds which holds

stocks of the six large banks.

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

year-on-year to $1.87 billion, driven by leveraged finance and

investment-grade activity, and equity underwriting. Its

investment banking fees pipeline increased compared with both

the end of the second quarter of 2024 and the end of 2023,

Goldman said. Its shares were down around 0.3%

"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 call with analysts.

Private equity players were also growing more active,

although they have been slower to deploy capital than the bank

expected, Goldman's CEO David Solomon said.

"But we do see more activity and it will continue to

accelerate over the next six to 24 months," Solomon said. He

also said there had been a lack of M&A by large companies which

he largely attributed to regulatory headwinds.

Bank of America's ( BAC ) investment banking fees jumped

18%year-on-year to $1.4 billion as improving confidence spurred

clients to issue debt and equity. "We feel good about our

pipeline," BofA's Chief Financial Officer Alastair Borthwick

told reporters.

At Citigroup ( C/PN ), investment banking was a bright spot for

the second straight quarter, with revenue up 31% driven largely

by investment grade debt issuance.

The trading businesses posted mixed results, with equities

trading boosted by a bullish stock market, while fixed income,

currencies and commodities (FICC) trading sometimes lagged.

At Goldman, FICC trading revenues were $2.96 billion, 12%

lower than the third quarter of 2023, dragged down by a decline

in interest rate products and commodities. Equities trading

revenues were $3.50 billion, up 18% year-on-year.

BofA's sales and trading revenue rose 12% to $4.9

billion, as equities climbed 18% while FICC rose 8%. At Citi,

equities trading revenue jumped 32% to $1.2 billion, but bond

trading revenue fell 6% to $3.6 billion.

BofA's shares were up 1.8%, while Citi's were down about

1.2% just before noon Eastern time on Tuesday.

Tuesday's 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 by higher investment banking fees and strong

trading revenue.

"Now that you have the beginning of the easing cycle,

animal spirits are coming back," said Thomas Hayes, chairman of

Great Hill Capital in New York, which holds regional bank

shares.

"Trading and investment banking profits are

re-accelerating ... That part of the business is just getting

started."

Mergers and acquisitions announced worldwide in 2024 totaled

$909 billion as of Sept. 30, up 22% year-on-year, 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 was a financial advisor to Mars, and

also provided Mars financing along with JP Morgan. Goldman Sachs ( GS )

advised 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.

Despite the optimism, dealmakers will be keenly watching the

U.S. elections and geopolitical situation which are adding 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.