Executive Summary
The last two quarters of 2025 have ushered in a sharp rebound in investment banking (IB) activity in the U.S., led by major banks which reported double‐digit year-over-year fee growth in advisory, underwriting, and equity/debt markets. Trading revenue has also surged, helping to lift net profits, while analysts and bank leaders project continued momentum through 2026 — though risks around regulatory shifts, interest rate volatility, and deal pipeline uncertainty persist.
Analysis
The resurgence in U.S. investment banking in Q3 2025 marks a turning point following earlier slowdowns attributed to macroeconomic volatility, elevated regulatory burdens, and trade tensions. Major banks such as Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America, and Citigroup saw strong growth in IB fee income, primarily driven by mergers & acquisitions (M&A), equity/debt underwriting (capital markets), and advisory functions. Goldman’s IB fees rose over 40% year over year; Morgan Stanley similarly posted ~44% growth in fees. Larger universal banks saw expanded deal pipelines, improved equity capital markets (ECM) activity, and underwriters gained traction amidst heightened equity and debt market volume. [8][10]
Trading has also contributed meaningfully, especially in equity and fixed income/commodities. Q4 2024 had already set a strong base, with banks reporting record trading revenues supported by more volatile markets and strong market sentiment. [2][4] Meanwhile, net interest income (NII) outcomes have been mixed but modestly improved as rate expectations shift. Banks have both benefitted from wider spreads and warned about compression risks should rates decline too rapidly. [5][2]
Leadership across these institutions has issued cautiously optimistic forward guidance. They generally expect IB pipelines to remain strong through late 2025 and into 2026, assuming no major macroeconomic shocks. Investment in technology, including AI deployment and capital markets digitization, has become part of the strategic thrust to gain competitive leverage. [6] Regulatory evolution is also central — anticipated changes under the current administration might loosen constraints, but uncertainty remains on implementation and global regulatory spill-overs. [4][5]
Open questions center on sustainability: Can the recent surge in deal activity withstand interest rate volatility? Will certain sectors dominate dealflow (e.g., tech, healthcare)? What is the risk of regulatory reversals? How will smaller banks or regional players fare amid this adjusted landscape? And what valuation risks are embedded in the current surge in ECMs and IPOs?
Supporting Evidence
- Goldman Sachs reported Q3 2025 IB fee revenues of approximately $2.7 billion, up ~42.5% YoY and ~21.3% from Q2. [10]
- Morgan Stanley saw its investment banking revenues rise ~44.1% YoY and ~36.9% sequentially in Q3. [10]
- Bank of America’s IB fees increased ~43.5% YoY and ~41% from the previous quarter. [10]
- Citigroup’s IB fees rose ~17% YoY and ~10.5% sequentially. [10]
- JPMorgan posted an ~17.1% YoY increase in IB fees in Q3, with a sequential gain of ~4.5%. [10]
- In Q4 2024, trading gains coupled with strong equity markets led to surging revenues across Goldman Sachs, JPMorgan, and others. Goldman’s Global Banking & Markets revenue jumped 33% YoY, with investment banking up ~24%. [2][4]
- According to a recent study, banks like JPMorgan, Capital One, Wells Fargo and others increased their published AI research output more than sevenfold from 2019 to 2024, and are accelerating deployments of agentic AI tools across trading desks and internal operations. [6]
- Analysts expect modest to mid-single digit gains in net interest income for most large banks in Q2/Q3 2025; some banks forecast slightly higher depending on loan demand and deposit pressure. [5]
- Deal volumes (M&A) globally hit ~$1.6 trillion in the first half of 2024, up ~20% YoY; while IPO activity still lagged but showing signs of revival. [8][2]
- Banks expressed regulatory risk, particularly around election policy, tariffs, stress test capital requirements, and changes in oversight. [4][5]
Sources
- [1] www.reuters.com (Reuters) — 2025-07-10
- [2] www.cnbc.com (CNBC) — 2025-01-16
- [3] www.reuters.com (Reuters) — 2025-01-15
- [4] finviz.com (Finviz) — 2025-10-20
- [5] www.bankingdive.com (Banking Dive) — 2025-09-25