Investment banking revenue growth at the major Wall Street banks is surpassing analyst expectations for the first quarter, driven by a surge in equity capital markets and debt market activity, according to analysts at Jefferies.
Bank of America Corp. is leading the pack among the top banks, with total investment banking revenue up more than 25% in the first quarter compared to the same period last year. JPMorgan Chase follows with a 15% increase, Citigroup Inc. with a 10% jump, Morgan Stanley with about 7%, and Goldman Sachs Group Inc. with a 3% rise.
Most of the stocks of these banks rose on Thursday amid a broader market uptick driven by the latest inflation data. JPMorgan Chase and Morgan Stanley climbed 0.4%, Citigroup edged up by 0.6%, Bank of America rose by 1.3%, while Goldman Sachs dipped by 0.3%.
With one month remaining in the first quarter, the five banks collectively are poised to deliver 13% revenue growth over the year-ago period, exceeding the 10% consensus analyst estimate, according to Jefferies.
Despite the overall growth, M&A advisory revenue remains a weak spot, experiencing an 18% decline compared to last year.
Equity capital markets revenue is up 39%, fueled by companies issuing stock, although initial public offerings (IPOs) have been slow to rebound this year.
Debt capital markets revenue has surged by 42% from the year-ago period and 81% from the fourth quarter, with Citigroup leading the charge with a 113% jump over the previous quarter. The other four banks have also seen significant increases, according to Jefferies analysts.
Analysts attribute the robust investment banking revenue growth to a record amount of investment-grade debt issuance and “normal seasonal patterns.” However, trading revenue remains mixed, with strength in fixed income potentially offset by “muted volatility” across other products.
In terms of stock performance, Bank of America’s shares have risen by 1.2% so far in 2024, while Citigroup has gained 7%, JPMorgan Chase has risen by 8.4%, Morgan Stanley is down by 7.7%, and Goldman Sachs has risen by 1.9%.
Comparatively, the broader market has also seen gains, with the Dow Jones Industrial Average up by 3.3% and the S&P 500 up by 6.3% year-to-date in 2024.