Global banks forecast improved investment banking outlook (updated)
05/12/2023 18:54
(Adds Goldman Sachs spokesperson on compensation expense
forecast, paragraph 15)
By Saeed Azhar and Tatiana Bautzer
NEW YORK, Dec 5 (Reuters) - Global bank executives said
that dealmaking conditions have begun to improve, with some
predicting a better outlook for strategic mergers and
acquisitions at an industry event on Tuesday.
Both M&A activity and initial public offerings (IPOs)
faltered last year after Russia's invasion of Ukraine and the
U.S. Federal Reserve's aggressive rate hikes to tame inflation.
"The M&A deals are coming a little faster," Bank of America
CEO Brian Moynihan told the Goldman Sachs U.S. Financial
Services Conference on Tuesday.
Moynihan said that as the interest rate environment
stabilizes, there would be more scope for dealmaking.
Goldman Sachs Chief Financial Officer Denis Coleman said a
lot of clients had an appetite and interest in "doing something
strategic," but he cautioned that sponsors or private equity
firms are cautious due to the higher cost of capital.
The capital markets environment has improved recently, which
encouraged large listings in the United States including the
listing of Arm Holdings ARM.O .
On the deals front, Goldman Sachs was among the advisers to
Pioneer Natural Resources PXD.N , which agreed to sell itself
to Exxon Mobil XOM.N in a $60 billion deal.
In a recent transaction, U.S. health insurer Cigna CI.N is
in talks to merge with Humana HUM.N , a source familiar with
the matter told Reuters, a deal that could exceed $60 billion in
value and would be certain to attract fierce antitrust scrutiny.
"Our dialog has never been stronger, conversations and
pitches are happening," Truist Financial TFC.N CEO Bill Rogers
said.
Moynihan said BofA will outperform the industry on
investment banking fees in the current quarter.
"We'll be at about $1 billion in fees this quarter,"
reflecting a low single-digit decline that "outperforms the
industry." The industry-wide investment banking fee pool is
expected to drop by 10% to 15%, he said.
Independent investment bank Evercore EVR.N is also
optimistic about the outlook for deals.
"There is no question that activity levels are high in our
firm. But the announcements will depend on market stability and
confidence levels, no board wants to announce a deal and get the
stock crushed," Evercore Chairman and CEO John Weinberg said.
Meanwhile, trading in equities and fixed income, currencies
and commodities is on track to be flat on an annual basis,
Goldman's Coleman said.
Goldman Sachs expects compensation expenses to rise by a low
to mid single-digit percentage this year, a spokesperson said.
This reflected the performance of its core businesses,
Coleman said.
Goldman bosses are considering bigger bonuses to retain star
traders and dealmakers this year as the bank looks to win over
some who were disappointed by smaller payments in 2022, Reuters
reported last month, citing sources familiar with matter.
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(Reporting by Saeed Azhar and Tatiana Bautzer in New York
Editing by Lananh Nguyen, Alexander Smith and Matthew Lewis)
((Saeed.Azhar@thomsonreuters.com; +1 347 908-6341; Reuters
Messaging: saeed.azhar.reuters.com@reuters.net))