Wall Street Firms Report 14th Consecutive Quarter of Decline in Investment Banking Revenues

For the 14th consecutive quarter, investment banking divisions at major U.S. Wall Street firms have contributed less than 25% to total revenues, underscoring a persistent downturn in deal-making activities. This trend is primarily attributed to subdued mergers and acquisitions (M&A) and initial public offerings (IPOs), influenced by high interest rates, geopolitical instability, and stringent regulatory environments. Conversely, trading revenues have surged, driven by market volatility, with the five largest Wall Street institutions—JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley—expected to report a combined $31 billion in trading revenues for Q2 2025, more than triple the $7.5 billion anticipated from investment banking activities.

Investment banking revenues are projected to drop nearly 10% year-over-year in Q2 2025. This marks the 14th consecutive quarter where these revenues have contributed less than 25% to the total revenues of major U.S. banks. In contrast, trading revenues are forecasted to rise almost 10% year-over-year. The five largest Wall Street institutions are expected to report a combined $31 billion in trading revenues for Q2 2025, significantly outpacing the $7.5 billion anticipated from investment banking activities. The slump in investment banking is attributed to subdued deal-making and equity capital markets following the 2021 bubble burst. Macroeconomic and geopolitical factors, including high interest rates, geopolitical instability, and a rigid regulatory environment, have hindered recovery.

Analysts express cautious optimism for a potential rebound in late 2025, particularly in equity issuance, though M&A activity may continue to face challenges. Despite investors maintaining hopes for a rebound, macroeconomic and geopolitical factors have hindered recovery. Some optimism persists for late 2025, especially around equity issuance, but M&A may remain flat.

The prolonged decline in investment banking revenues may lead to job cuts and restructuring within these divisions, affecting employment in the financial sector. The shift from investment banking to trading revenues indicates a change in market dynamics, with banks capitalizing on market volatility rather than traditional deal-making activities. Persistent underperformance in investment banking could impact investor confidence and stock valuations of these financial institutions.

While trading revenues have provided a buffer against the decline in investment banking, the sustained downturn raises concerns about the future of deal-making activities on Wall Street. Analysts express cautious optimism for a potential rebound in late 2025, particularly in equity issuance, though M&A activity may continue to face challenges.