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Investment banking revenues at Wall Street’s biggest banks are expected to top $9bn in the third quarter for the first time since 2021, as dealmaking finally shows signs of flourishing under the Trump administration. 

Analysts expect quarterly revenues reported this week from advisory work and equity and debt underwriting at JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs and Morgan Stanley to total $9.1bn, according to estimates compiled by Bloomberg.

That would mark an increase of 13 per cent from a year ago, and a 50 per cent improvement on the lows of 2023, although it is still well down on the $13.4bn the banks pulled in during the final quarter of 2021’s boom.

The third-quarter forecast reflects the growing optimism on Wall Street that the surge in new corporate takeovers, leveraged buyouts and stock market listings, predicted after Donald Trump’s return to the White House, may now be coming to fruition. 

Investment banking fees have sagged since the Federal Reserve started lifting interest rates in early 2022, while the Biden administration’s restrictive antitrust policies created a chilling effect on mergers. 

Although bankers anticipated Trump’s return to office in January would unleash a boom, trade policy uncertainty and deep government cuts instead stunted dealmaking in the early part of the year.

That has faded in recent months, adding to optimism that the upturn in fortunes for investment banking may at last be coming to fruition. Dealmakers see the Trump administration as more willing to approve deals and allow greater industry consolidation.

Jason Goldberg, a banking analyst at Barclays, said the “pro-growth” environment and lighter regulatory touch were boosting sentiment, adding: “And what’s going on with AI, whether it’s a need to invest or adapt, is certainly contributing as well.”

The recently announced $55bn leveraged buyout of Electronic Arts is emblematic of the pick-up in activity, even if the banks that worked on the deal — JPMorgan and Goldman — will not collect most of their fees until the transaction eventually closes. 

Banks’ trading businesses have picked up the slack during the downturn in advisory work. Following a period of lacklustre returns in the 2010s, trading units have generated consistently higher revenues during five years of heightened market volatility.

Analysts had expected volatility — and trading revenues — to settle down. However, they forecast that third-quarter equities and fixed-income trading across the five banks will be about 8 per cent higher than a year earlier at close to $31bn. 

“Trading activity . . . has hung on better than we would have thought following the market sort of settling after ‘liberation day’ earlier this year,” said Scott Siefers, a senior analyst at Piper Sandler. 

Quarterly net income at the six largest US banks by assets — which includes the five investment banks and Wells Fargo — is overall forecast to have risen by about 8 per cent from a year earlier. JPMorgan, Goldman, Citi and Wells report results on Tuesday, followed by Morgan Stanley and BofA on Wednesday.

“Banks have become just a means through which investors can express a view on either macroeconomic health or interest rates,” said Siefers. “Both of them seem like they’re in pretty good shape so consequently inventors have gravitated to the group.”

Banks have signalled relative calm about the health of US borrowers despite elevated interest rates. The four largest bank lenders — JPMorgan, BofA, Wells and Citi — are forecast to collectively provision about $8bn for potential loan losses, which would be roughly unchanged from a year earlier. 

However analysts said results would be carefully scrutinised for signs of weakness in US households.

“Consumer will certainly be an area of focus. There’s been a lot of mixed trends in the consumer numbers,” said Gerard Cassidy, banking research analyst at RBC Capital Markets. 

The recent collapse of subprime auto lender Tricolor, which is facing fraud allegations, has also raised concerns about the financial health of lower-income Americans.

“There’ll be a little bit more scrutiny or focus on credit quality given the recent news that we’ve seen from the likes of Tricolor and First Brands,” said Baird senior analyst David George. “Needless to say that will be I’m sure an intense focus.”