President-elect Donald Trump's return to the White House is seen fueling a dealmaking revival that could bolster investment banking income to $316 billion globally next year, a jump of about 5.7% on 2024, data seen by Reuters shows.
M&A bankers are forecast to rake in about $27.6 billion in fees, according to previously unreported figures from analytics and insight provider Coalition Greenwich, in what could be their second-best year in at least two decades.
Global investment banking income has only topped $300 billion five times in the last 20 years, the data shows, with earnings power in recent years stifled by the pandemic, inflation and global political unease.
Trump's pro-business leanings should help an already thriving U.S. economy, which could in turn encourage greater volumes of cross-border dealmaking and investment from European firms chasing growth, bankers said.
'CLARITY & STABILITY'
"I know it's that time of year where bankers love to be bullish, but we actually do think that the current climate — political clarity and macro stability — will help drive M&A," Richard King, head of corporate banking, EMEA, at Bank of America said.
"There's a lot of pent up demand that will likely come through in 2025," he said, pointing to private equity as well as acquisitive trade buyers across a range of sectors including healthcare, tech and energy.
Trump's administration could be particularly conducive to M&A because he is seen as likely to wave more deals through that had been blocked under the previous administration over competition or U.S. strategic importance concerns, bankers said.
While rainmakers are getting busier, bankers managing debt sales for companies and governments could also see a jump in activity, bringing in as much as $49 billion, a new record, according to Coalition.
Revenue from the trading of securities — the biggest contributor to investment bank income — forecast at $220 billion for 2025 would be the highest since 2022.
Credit and emerging markets macro-related products are likely to see the biggest jump on 2024 figures next year, with a 6% increase each while trading in interest rate-related products could shrink as much as 3.5%.
"We have healthy corporate balance sheets but we have a rate environment that has increased cost of capital...so businesses cannot be lazy," said Taylor Wright, co-head of global banking at Barclays, predicting private equity firms will be active as both buyers and sellers of businesses.
"Geopolitical risk, in our view, is the wild card. It's hard to plan for that but absent that, we see a lot of factors that suggest that the next 12 to 24 months should be very good for investment banking."
RETURN OF THE FAT CATS?
With revenue on the increase, banker payouts look destined to follow suit, although bonuses will remain below bumper 2021 levels for now.
New York-based pay consultancy Johnson Associates said last month it expected banker salaries to rise in almost every business unit, with the exception of real estate investing.
Headhunters are also reporting new hiring mandates from some banks following Trump's re-election, and a focus on adding staff in the first quarter, traditionally a time when most banks look to reduce headcount.
Hiring has increased across securities trading and from junior through to senior positions, said Natalie Nicolaou, Senior Manager, Distribution & Front Office, at Robert Walters UK, told Reuters.
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