Finance

American investment banks disclosed a record-smashing quarter, helped by surging trading activity around the U.S. election and a pickup in investment banking deal flow.
JPMorgan Chase, Goldman Sachs and Morgan Stanley easily topped estimates for the fourth quarter.
And deal activity is only picking up steam, according to bank executives.

Jonathan Gray, president and chief operating officer of Blackstone Inc., from left, Ron O’Hanley, chief executive officer of State Street Corp., Ted Pick, chief executive officer of Morgan Stanley, Marc Rowan, chief executive officer of Apollo Global Management LLC, and David Solomon, chief executive officer of Goldman Sachs Group Inc., during the Global Financial Leaders’ Investment Summit in Hong Kong, China, on Tuesday, Nov. 19, 2024.
Paul Yeung | Bloomberg | Getty Images

American investment banks just disclosed a record-smashing quarter, helped by surging trading activity around the U.S. election and a pickup in investment banking deal flow.
Traders at JPMorgan Chase, for instance, have never had a better fourth quarter after seeing revenue surge 21% to $7 billion, while Goldman Sachs’ equities business generated $13.4 billion for the full year — also a record.

For Wall Street, it was a welcome return to the type of environment craved by traders and bankers after a muted period when the Federal Reserve was raising rates as it grappled with inflation. Boosted by a Fed in easing mode and the election of Donald Trump in November, banks including JPMorgan, Goldman and Morgan Stanley easily topped expectations for the quarter.
But the grand machinery keeping Wall Street moving is just picking up steam. That’s because, deterred by regulatory uncertainty and higher borrowing costs, U.S. corporations have mostly sat on the sidelines in recent years when it came to buying competitors or selling themselves.
That’s about to change, according to Morgan Stanley CEO Ted Pick. Buoyed by confidence in the business environment, including hopes for lower corporate taxes and smoother approvals on mergers, banks are seeing growing backlogs of merger deals, according to Pick and Goldman CEO David Solomon.
Morgan Stanley’s deal pipeline is “the strongest it’s been in 5 to 10 years, maybe even longer,” Pick said Thursday.

‘Pounding the table’

Capital markets activity including debt and equity issuance had already begun recovering last year, rising 25% from the depressed levels of 2023, per Dealogic figures. But without normal levels of merger activity, the entire Wall Street ecosystem has been missing a key driver of activity.

Multibillion-dollar acquisitions sit at “the top of the waterfall” for investment banks like Morgan Stanley, Pick explained, because they are high-margin transactions that “have a multiplier effect through the whole organization.”
That’s because they create the need for other types of transactions, like massive loans, credit facilities or stock issuance, while generating millions of dollars in wealth for executives that needs to be managed professionally.
“The last piece is what we’ve been waiting for, which are M&A tickets,” Pick said, referring to the contracts governing merger deals. “We are excited about pushing that through to the rest of the investment bank.”
Results from Goldman on Wednesday spurred veteran Morgan Stanley banking analyst Betsy Graseck to raise her 2025 forecast for the bank’s earnings by 9%.
“We’re pounding the table on the capital markets rebound theme,” Graseck said in a note. “Expect more EPS beats throughout this year as the industry trading wallet grows and investment banking activity rebounds.”

IPO revival?

Another engine of value creation for Wall Street that has been slow in recent years is the IPO market — which is also set to pick up, Solomon told an audience of tech investors and employees Wednesday.
“There has been a meaningful shift in CEO confidence,” Solomon said earlier that day. “There is a significant backlog from sponsors and an overall increased appetite for deal-making supported by an improving regulatory backdrop.”
After a lean few years, it should make for a profitable time for Wall Street’s dealmakers and traders.
WATCH: Goldman Sachs tops estimates More

Fed Governor Christopher Waller told CNBC on Thursday that the central bank could lower interest rates multiple times this year if inflation eases as he is expecting.
“As long as the data comes in good on inflation or continues on that path, then I can certainly see rate cuts happening sooner than maybe the markets are pricing in,” he said.
Traders increased their bets for a slightly more aggressive pace of rate cuts following Waller’s remarks.

Federal Reserve Governor Christopher Waller said Thursday that the central bank could lower interest rates multiple times this year if inflation eases as he is expecting.
In a CNBC interview, the policymaker said he expects the first cut could come in the first half of the year, with others to follow so long as economic data on prices and unemployment cooperate.

“As long as the data comes in good on inflation or continues on that path, then I can certainly see rate cuts happening sooner than maybe the markets are pricing in,” Waller said during a “Squawk on the Street” interview with Sara Eisen.
Asked how many that could entail, he responded, “That’s all going to be driven by the data. I mean, if we make a lot of progress, you could do more,” which he said could mean three or four, assuming quarter percentage point increments.
“If the data doesn’t cooperate, then you’re going to be back to two and going maybe even one, if we just get a lot of sticky inflation,” he said.
Traders increased their bets for a slightly more aggressive pace of rate cuts following Waller’s remarks. Market-implied odds for a May move rose to about 50%, though June appeared to be the better bet, according to CME Group data. Expectations for a second reduction by the end of the year climbed to about 55%, or about 10 percentage points higher than before he spoke.
At the core of Waller’s hopes for easing is a belief that inflation will ease further as the year goes on, despite several months’ of data showing stickiness in some key prices. The consumer price index slowed to a 3.2% core reading, excluding food and energy, for December, down 0.1 percentage point from the prior month though still well above the Fed’s 2% target.

“Right now, I think inflation is going to continue to come in towards our target. The year over year, stickiness that we saw in 2024 I think will start to dissipate,” he said. “So I may be a little more optimistic about inflation coming down than the rest of my colleagues, and that’s what’s driving my outlook for the path for policy.”
At the December meeting, Federal Open Market Committee members penciled in two cuts for 2025, though commentary after the meeting has pointed toward a cautious and patient approach.
The FOMC next meets Jan. 28-29, with markets pricing in almost no chance of a move.
“Well, January, we need to kind of see what’s going to happen. … We’re in really no rush to do things,” Waller said.

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Bank of America on Thursday posted results that topped expectations for profit and revenue on better-than-expected investment banking and interest income.
The company said fourth-quarter profit more than doubled to $6.67 billion, or 82 cents per share, from a year earlier.
Perhaps more than other megabanks, the firm’s fortunes seem to hinge on rates and their impact on net interest income.

Brian Moynihan, CEO of Bank of America, speaking on CNBC’s Squawk Box at the WEF Annual Meeting in Davos, Switzerland on Jan. 16th, 2024.
Adam Galici | CNBC

Bank of America on Thursday posted results that topped expectations for profit and revenue on better-than-expected investment banking and interest income.
Here’s what the company reported:

Earnings: 82 cents vs. 77 cents expected, according to LSEG
Revenue: $25.5 billion vs. $25.19 billion expected

The company said fourth-quarter profit more than doubled to $6.67 billion, or 82 cents per share, from a year earlier, when the bank had a $2.1 billion Federal Deposit Insurance Corp. assessment tied to the 2023 regional bank failures and a $1.6 billion charge tied to accounting on interest rate swaps.
Revenue jumped 15% to $25.5 billion on rising fees from investment banking and asset management and stronger trading results.
Investment banking fees surged 44% to $1.65 billion, roughly $180 million more than analysts had expected. That indicates the company’s bankers had a strong end to the year, as just last month, CEO Brian Moynihan told investors that investment banking fees would jump 25% in the quarter.
Unlike with rivals including Goldman Sachs, Bank of America’s trading operations didn’t significantly exceed expectations during the quarter. Fixed income revenue rose 13% to $2.48 billion, roughly in line with the StreetAccount estimate, while equities revenue rose 6% to $1.64 billion, also essentially matching expectations.
But the firm said that net interest income, one of the most watched figures for the lender, rose 3% to $14.5 billion, exceeding estimates by about $170 million.

Perhaps more than other megabanks, the firm’s fortunes seem to hinge on rates and their impact on net interest income. Investors will be keen to hear about the company’s target for 2025, especially as expectations for rate cuts have been reined in.
On Wednesday, JPMorgan Chase and Goldman topped estimates on better-than-expected results from Wall Street units. Morgan Stanley is also scheduled to post results Thursday.
This story is developing. Please check back for updates. More

Ted Pick, CEO Morgan Stanley, speaking on CNBC’s Squawk Box at the World Economic Forum Annual Meeting in Davos, Switzerland on Jan. 18th, 2024.
Adam Galici | CNBC

Morgan Stanley on Thursday topped estimates for fourth quarter earnings and revenue as the firm’s equities and fixed income traders exceeded expectations.
Here’s what the company reported:

Earnings: $2.22 a share vs. $1.70 LSEG estimate
Revenue: $16.22 billion, vs. $15.03 billion estimate

The bank said that quarterly profit more than doubled to $3.71 billion, or $2.22 a share, from a year earlier, when it had a pair of regulatory charges.
Revenue rose 26% to $16.22 billion as results in all of the bank’s major businesses improved.
It was the firm’s equities trading business that shone brightest in the quarter, producing a 51% jump in revenue to $3.3 billion, or nearly $650 million more than the StreetAccount estimate. Morgan Stanley cited increased client activity and strength in its prime brokerage business that caters to hedge funds.
The firm’s fixed income operations saw revenue jump 35% to $1.93 billion, about $250 million more than the StreetAccount estimate, on rising activity in credit and commodities markets.
Investment banking revenue rose 25% to $1.64 billion, essentially matching the StreetAccount estimate, on rising advisory and equity capital markets results.

The bank’s massive wealth management business will be helped by high stock market values in the fourth quarter, which inflates the management fees it collects.
Investment banking activity continued to rebound last quarter, jumping 29% in the quarter, per Dealogic figures, fueled by rising advisory and equity capital markets activity. And trading activity was supported by an eventful election season.
On Wednesday, JPMorgan Chase, Goldman Sachs and Citigroup each topped expectations, helped by better-than-expected revenue from trading or investment banking.
This story is developing. Please check back for updates. More

U.K. Robinhood rival Freetrade has been acquired by IG Group for £160 million ($195 million) — a 29% discount to its last valuation.
The deal is a potential signal for further consolidation coming to the wealth technology industry.
Last year, Hargreaves Lansdown was acquired for £5.4 billion by a consortium of investors including private equity giant CVC Group.

The Freetrade application on a smartphone and desktop PC.

LONDON — Freetrade, a British rival to popular stock trading app Robinhood, said Thursday that it’s been acquired by online investing platform IG Group.
The deal values Freetrade at £160 million ($195 million) — a 29% discount to its last valuation. The startup said that it would continue to operate as a commercially standalone entity under its own brand.

Founded in 2016, Freetrade garnered popularity among mainly younger, more inexperienced traders in the U.K. with its zero-commission trading platform.
The app initially began by offering equities but later expanded to roll out trading in exchange-traded funds, savings products and government bonds.
In pandemic times, Freetrade was riding high on a retail trader frenzy. The app benefited heavily from GameStop “short squeeze” in early 2021, when traders on a Reddit forum for retail investors piled into the stock and caused it to rally in price.
Short-selling refers to the practice of an investor borrowing an asset and then selling it on the open market with the expectation of repurchasing it for less money in future for a profit.
However, worsening macroeconomic conditions in 2022 and 2023 hit Covid high-fliers like Freetrade hard — and in 2023, Freetrade completed a crowdfunding round at a valuation of £225 million down 65% from the £650 million it was worth previously.

The deal is a potential signal for further consolidation coming to the wealth technology industry. It comes after Hargreaves Lansdown was acquired for £5.4 billion by a consortium of investors including private equity giant CVC Group.
Viktor Nebehaj, CEO and co-founder of Freetrade, described the takeover as a “transformative deal that recognizes the significant value that Freetrade has created.”
“Together with IG Group’s significant resources and backing, this is an exciting opportunity to accelerate our growth and delivery of new products and features,” he added.
Freetrade said the transaction is subject to customary closing conditions including regulatory approvals, adding that it expects it will close the deal later this year. More

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