<\/p>\n
Investment banking pipeline looks healthy, trading activity should benefit too.<\/p>\n
Wall Street delivered stronger than expected capital markets results for the fourth quarter, setting the stage for a solid 2025, says Morningstar DBRS Inc.<\/p>\n
In a report published Friday, the rating agency noted that the large Wall Street banks \u2014 JP Morgan Chase & Co., Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley \u2014 beat expectations for their capital markets businesses in their latest quarterly earnings, due to still-strong trading and a rebound in investment banking.<\/p>\n
For the latest quarter, the banks\u2019 aggregate net revenues were up 14% on a year-over-year basis, and are now 37% higher than their pre-pandemic levels from 2019, DBRS reported.<\/p>\n
On average, net revenues from investment banking rose 35% year over year, reflecting underlying strength, \u201cparticularly in equity underwriting, where higher equity markets supported strong follow-on and IPO issuance,\u201d the report noted.<\/p>\n
Similarly, net revenues from the banks\u2019 sales and trading businesses were up strongly, rising 28% year over year on the equity side, and 27% in fixed income.<\/p>\n
Equity revenues were supported by \u201cstrength in cash products and higher average balances in prime brokerage,\u201d DBRS said, while fixed-income revenues were driven by strength in credit products and currencies.<\/p>\n
For each of the banks, \u201cnet revenues were at or close to record-setting levels,\u201d DBRS noted.<\/p>\n
Looking ahead, investment banking is expected to remain strong in 2025 amid growing economic optimism, the report said.<\/p>\n
\u201cIndeed, backlogs improved sequentially and remain robust, particularly in mergers and acquisitions, where pipelines have reached their highest level in nearly a decade,\u201d DBRS said.<\/p>\n
\u201cAs always, trading revenues are a wildcard, but the potential for follow-on trading opportunities resulting from increased investment banking activity would likely benefit results,\u201d it added.<\/p>\n
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