Investment banks eye 2025 income boom as Trump drives deal rebound
06/12/2024 06:00
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Investment bank revenue could jump 5.7% in 2025, Coalition
says
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Income could grow to $316 billion globally, estimates show
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M&A rebound anticipated as U.S. economy charges on
By Sinead Cruise and Lawrence White
LONDON, Dec 6 (Reuters) - President-elect Donald Trump's
return to the White House is seen fuelling 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.
"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 BAC.N 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 BARC.L , 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 RWA.L , told Reuters.
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2025 a bumper year as dealmaking bounces back https://reut.rs/3Vlx4oC
2025 investment bank revenues to pass $300bn https://reut.rs/4f5qM3s
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(Reporing by Sinead Cruise and Lawrence White; Editing by
Alexandra Hudson)
((sinead.cruise@thomsonreuters.com; 020 7513 5026; Reuters
Messaging: sinead.cruise.thomsonreuters.com@reuters.net))