🏦 Wall Street Banks Enjoy Dealmaking Boom but Warn of Asset Bubbles
Major U.S. bank executives expect more windfalls as equity markets surge and the economy remains resilient despite ongoing tariffs. However, several warned that parts of the market are showing signs of froth and potential asset bubbles.
At Goldman Sachs, investment banking revenue jumped 42% in the third quarter, while JPMorgan Chase reported a 16% increase in investment banking fees, both driven by strong mergers and acquisitions (M&A) activity. Wells Fargo and Citigroup also posted solid results across their investment banking divisions.
“Pipelines look good, the activity levels are good, and the conversations are constructive,” said Wells Fargo CFO Mike Santomassimo, noting healthy client engagement and momentum heading into the next quarter.
JPMorgan’s CFO Jeremy Barnum echoed this optimism, saying the investment banking environment “is quite good,” following one of the busiest summers for M&A in years. He added that conditions for equity capital markets and initial public offerings (IPOs) remain strong as the fourth quarter begins.
💰 Asset Prices Fuel Profits — But Risks Are Rising
The M&A boom has been driven by record-high U.S. equity prices, which continue to push markets to new peaks. Yet some executives are cautious about overheating trends.
“A lot of assets look like they’re entering bubble territory,” warned JPMorgan CEO Jamie Dimon. “Those prices are boosting investment banking and equities, but there are early signs of excess in credit markets.”
Similarly, Citigroup CFO Mark Mason noted signs of frothiness in equities:
“When you look at equity markets, it’s hard not to see some froth in certain sectors. We’ll have to watch how that evolves,” Mason said during a press call.
📈 Investment Banking Fees Hit Four-Year High
Global investment banking fees reached their highest level since 2021, totaling $99.4 billion so far this year, according to LSEG data. Earnings have been underpinned by strong performance in M&A and capital markets, helping Wall Street remain profitable despite broader economic uncertainty.
“Momentum continues across most business lines, with strong Wall Street activity and resilient consumer loan demand,” said Macrae Sykes, portfolio manager at Gabelli Funds.
Dealmakers in technology and financial M&A stood out, with fees up 55% and 34%, respectively. Global M&A volumes surged 40% year-over-year in the third quarter, supported by lower interest rates and reduced regulatory pressure under President Trump.
🤝 Megadeals Return as Confidence Builds
The third quarter saw a wave of multibillion-dollar deals, totaling an astonishing $1.26 trillion. One standout was the $55 billion acquisition of video game developer Electronic Arts (EA) by Silver Lake, Saudi Arabia’s PIF, and Affinity Partners, marking the largest leveraged buyout in history.
As trade tensions eased and confidence returned, megadeals rebounded, though total deal count dropped. Only 8,912 deals were completed — a 16% decline from last year and the weakest third-quarter deal volume in two decades, according to Dealogic.
This resurgence also sparked a wave of executive reshuffling as senior bankers moved between firms to capture new opportunities. Even the U.S. government has reportedly been pursuing deals across more than 30 industries, targeting sectors critical to national and economic security.
📊 Outlook: Opportunity and Caution on Wall Street
While America’s top banks continue to benefit from record dealmaking and strong markets, leaders remain wary of overvaluation risks. As asset prices rise and M&A pipelines grow, many executives are urging caution to prevent the next bubble from forming.
