US Banks Gain from Dealmaking Amid Asset Bubble fears
Top executives from major US banks forecasted additional gains as equity markets experienced a significant rise over the past quarter, with the economy remaining resilient in the face of tariffs. However, some cautioned about potential overvaluation in asset prices. Goldman Sachs reported a remarkable 42 per cent increase in investment banking revenue for the third quarter, whereas JPMorgan Chase saw a 16 per cent rise in investment banking fees, as disclosed by the banks on Tuesday. Wells Fargo and Citigroup demonstrated strong performances in investment banking. “Pipelines look good, the activity levels are good, and the conversations are constructive” with clients, Mike Santomassimo stated. Jeremy Barnum, his counterpart at JPMorgan, remarked that the investment banking environment is quite favorable following the bank’s busiest summer in M&A for a considerable period. Conditions for equity capital markets and IPOs are also strong as we approach the fourth quarter, Barnum added.
The vigor in M&A is supported by elevated asset prices, as US equity markets have consistently reached new highs. Nonetheless, this is raising certain apprehensions. “Many assets appear to be approaching bubble territory. But those prices fuel IB, equities, asset management,” said Jamie Dimon. Dimon remarked that in credit markets, there were “early signs of some excess.” Mark Mason remarked that there were indications of frothiness in equity markets. “When you look at equity markets, I think it’s hard not to think that there could be some frothiness in different sectors, and so we’ll have to kind of see how that ultimately evolves,” Mason told. In the first nine months of the year, global investment banking fees have achieved a four-year high, providing strong support for earnings. “What we’ve learned so far is that momentum continues across the majority of business lines, remaining strong and the demand for consumer loans is very resilient,” said Macrae Sykes. According to data, worldwide investment banking fees have increased by 9 percent, reaching $99.4 billion this year, marking the highest level since records were established in 2021.
In the third quarter, dealmakers in mergers and acquisitions emerged as standout performers, especially within the technology and financial sectors. The data revealed that fees surged by 55 per cent in technology M&A and by 34 per cent in financial M&A. Multibillion-dollar deals have resumed following a reduction in tariff uncertainty and efforts by the Trump administration to ease regulations. In the third quarter, megadeals reached an impressive total of $1.26 trillion. The $55 billion acquisition last month of video game developer Electronic Arts by buyout group Silver Lake, Saudi Arabia’s Public Investment Fund, and Affinity Partners stands as the largest leveraged buyout in history.
The resurgence in dealmaking has been driven by stocks reaching historical highs, reduced interest rates, and eased regulations under Trump, which have countered the uncertainty from trade tensions that had previously hindered activity this year. According to data, global mergers and acquisitions experienced a remarkable surge of 40 per cent in the third quarter compared to the previous year. Despite the resurgence of megadeals, only 8,912 deals were signed, reflecting a 16 percent decline from the previous year. This marks the lowest deal volume for a third quarter in two decades, according to the data. The resurgence in activity has also prompted a wave of job-hopping among senior executives. This month, source reported that the US government is actively engaging in dealmaking, targeting up to 30 industries and involving numerous companies considered vital to national or economic security.
