Investment banking was expected to make a strong comeback in early 2025. But instead, economic uncertainty and global market volatility slowed things down. Even though the five biggest U.S. banks: Goldman Sachs, Morgan Stanley, JP Morgan, Citigroup, and Bank of America made a total of $8.4 billion from investment banking in the first quarter, the numbers were not as high as they had hoped.
According to David Solomon, the CEO of Goldman Sachs, the year began with big hopes for more deals. But because of unpredictable market conditions, those plans were delayed. The biggest blow came from rising trade tensions. Early in the year, Donald Trump added tariffs on Canadian and Mexican goods. Then, he threatened tariffs on more countries. This shook investor confidence and slowed down deal-making.
Although Trump later reduced some tariffs to calm the bond markets, the damage had already been done. Trade war fears caused many companies to put their investment plans on hold. Solomon said that the risk to the U.S. and worldwide economy is still very real, and even though the government now wants a slower and more thoughtful trade policy, no one knows for sure what will happen next.
Looking at individual banks, JP Morgan did best in the first quarter, earning $2.2 billion from investment banking, a 12% increase. On the other hand, Goldman Sachs saw a drop of 8%, mainly because of fewer advisory deals. In fact, Goldman was the only one of the top five banks to report a decrease in advisory revenue, which fell by 22%.
Citi stood out with a big bounce in advisory revenue, an 84% increase to $424 million. Jane Fraser Citi’s CEO said they were still doing many deals, but most clients were choosing to wait instead of moving forward with new investments.
Debt underwriting, another key area in investment banking, grew by 10% across the five banks. JP Morgan and Morgan Stanley led this growth, while Citi saw a slight drop. However, equity underwriting (issuing new shares) continued to falter because of shaky stock markets. Revenue from equity deals slipped 16% overall. Goldman Sachs managed to keep its numbers steady, but the rest saw a decline.
Even with all these ups and downs, bank leaders remain hopeful. They say that the business is not gone, just delayed. Morgan Stanley CEO Ted Pick described the situation as clients “pausing” rather than cancelling their plans. He believes some big deals, like IPOs and mergers, will just happen later in the year or even early next year.
Overall, investment banking is still alive, but global economic troubles , like trade tensions and market fears, have put the brakes on its growth. While banks continue to talk with clients and prepare for deals, actual progress will depend on how stable the economy becomes in the coming months.
Investment banks like B. Riley Financial Inc. (NASDAQ; RILY) will be hoping that the economic landscape improves quickly so that their forecasted revenues don’t take undue large hits this year.
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