Wall Street is on track for its strongest investment banking performance since the pandemic, driven by a notable rise in fee income among the largest US banks. Analysts and market data suggest that quarterly results due this week will confirm this shift in fortunes after several lacklustre years.
The five largest US investment banks, including JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup, are expected to report about $10bn in investment banking revenues for the fourth quarter, roughly 13 per cent higher than a year earlier. If realised, this will bring total investment banking revenues for 2025 to nearly $38bn, around 50 per cent above the 2023 trough and the highest aggregate level since 2021. Analysts estimate that at firms most reliant on fees, such as Goldman Sachs and Morgan Stanley, investment banking fee income will be 17 per cent higher in 2025 compared with the prior year. Projections for 2026 also point to continued increases, with forecasts of around an 11 per cent rise in fees next year.
Market optimism is underpinned by robust deal pipelines, particularly in mergers and acquisitions, alongside growing demand for assets related to artificial intelligence, a more constructive US regulatory environment and heightened private equity activity. These conditions have contributed to a rebound in bank stocks, with Goldman Sachs and Morgan Stanley trading at elevated multiples relative to earnings. Nonetheless, some analysts caution that lofty market expectations could be challenging to surpass.
During the years following the pandemic, investment banking had lagged other revenue streams such as trading, which helped offset weaknesses. In the fourth quarter of 2025, investment banking is forecast to account for more than 25 per cent of total Wall Street revenues for the first time since 2021, signalling a meaningful rebalancing of income sources within major banks.
