Wall Street’s investment banking sector is showing robust signs of recovery after nearly three years of pandemic-era volatility and economic uncertainty. Major financial institutions including Goldman Sachs, JPMorgan Chase, and Citigroup have all reported stronger-than-expected third-quarter results, signaling that the prolonged dealmaking drought that has affected banker compensation and morale may finally be easing.
Goldman Sachs Leads the Banking Recovery
Goldman Sachs emerged as the standout performer in the recent earnings season, reporting its third-highest quarterly net revenues ever at more than $15 billion. The bank’s investment banking division showed particularly strong performance, with overall fees totaling almost $2.7 billion – representing a 42% increase compared to the same period last year.
CEO David Solomon told investors during the quarterly earnings call that mergers and acquisitions activity has returned with significant force. “The setup remains constructive,” Solomon stated, pointing to a “more supportive regulatory environment” for spurring renewed activity. The bank’s advisory revenues surged 60% year-over-year to $1.4 billion, while equity underwriting revenues increased 21% to $465 million and debt underwriting jumped 30% to $788 million.
Major Deals Driving Banking Renaissance
The resurgence in dealmaking activity has been fueled by several high-profile transactions that have captured market attention. Goldman Sachs advised on the public offerings of Klarna and Figma, both of which went public last month. The bank also played key advisory roles in the proposed $50 billion Anglo American and Teck Resources merger and Electronic Arts’ $55 billion take-private deal.
Denis Coleman, Goldman’s chief financial officer, revealed that the bank’s dealmaking backlog has reached its highest level in three years across equity, debt, and advisory services. This suggests that the current momentum in Wall Street banking activity may continue through the end of 2025 and into 2026, as Solomon predicted “a very constructive M&A environment” through this period.
JPMorgan’s Diversified Strength
JPMorgan Chase reported a 16% increase in investment banking fees, with commercial and investment banking net revenues reaching nearly $20 billion for the quarter. CEO Jamie Dimon noted that “ECM and M&A activity picked up against a supportive backdrop,” highlighting how the improved market conditions are benefiting multiple banking segments simultaneously.
Kenneth Leon, director of equity research at CFRA Research, commented that “the quarter showcased the strength of JPMorgan’s diversified business model, with all major segments contributing to growth. We think this will lead the momentum for the rest of 2025 and into 2026.” The bank’s CFO Jeremy Barnum added that the rebound in lending is “mirroring the pickup in deal activity across our investment-banking businesses,” indicating synchronized recovery across different banking operations.
Citi’s Banking Ambition Under New Leadership
Citigroup’s investment bank generated more than $1.1 billion in fees, representing a 17% year-over-year increase. The performance improvement comes as the bank undergoes significant transformation under new investment banking chief Viswas Raghavan, a former JPMorgan dealmaker who joined Citi last year as executive vice chair and head of banking.
Corporate lending revenue surged nearly 40% as clients increasingly tapped the bank’s balance sheet for financing needs. This performance demonstrates how underwriting and lending activities are recovering in tandem across the banking sector, creating multiple revenue streams for major financial institutions.
Market Context and Cautious Optimism
Despite the strong results, banking executives maintain a cautiously optimistic outlook. JPMorgan’s Barnum warned that “market prospects can change on a dime and Wall Street shouldn’t get too comfortable.” He specifically noted that continued government shutdown scenarios could stall capital markets and public issuance activity, potentially impacting equity capital markets bankers who facilitate public offerings.
The broader market context shows significant improvement in deal volume. According to LSEG data, the volume of deals worth $5 billion or more has surged 64% from last year, with 100 such transactions recorded so far in 2025 compared to 61 by the same point in 2024. This acceleration in large-scale transactions has created benefits across multiple banking institutions.
Technology Sector Parallels
The banking recovery coincides with significant developments in the technology sector that may influence future dealmaking activity. Recent announcements including OpenAI’s partnership with Broadcom for advanced chip development and Microsoft’s breakthrough in AI benchmarking suggest continued innovation investment that could drive future banking activity.
Additionally, corporate initiatives around digital transformation and sustainability, such as Microsoft’s new sustainability features in Azure and findings that AI could save significant productivity hours, indicate broader corporate investment trends that typically generate banking services demand. Even entertainment sector developments like Apple TV’s rebranding initiative represent the type of corporate activity that drives advisory and financing work for investment banks.
Risk Factors and Future Outlook
While the current banking recovery appears robust, several risk factors remain. Security concerns highlighted by incidents such as the Pixnapping Android exploit demonstrate how technological vulnerabilities could impact financial transactions and market confidence. Banking executives must navigate these challenges while capitalizing on the improved dealmaking environment.
The synchronized recovery across advisory, equity underwriting, and debt underwriting suggests that the current banking rebound has multiple drivers rather than relying on a single business line. This diversification provides some protection against sector-specific downturns and indicates that the recovery may have staying power if market conditions remain favorable.
As banking institutions continue to adapt to the post-pandemic financial landscape, the recent quarterly results from Goldman Sachs, JPMorgan, and Citigroup provide compelling evidence that Wall Street’s core investment banking functions have regained their momentum. The coming quarters will reveal whether this recovery represents a temporary surge or the beginning of a sustained period of growth for the financial services industry.
