Wall Street banks set for investment banking fee surge on SpaceX IPO and mega-mergers

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Wall Street banks fee surge

Highlights

JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup are forecast to report a 27% year-on-year increase in Q2 investment banking fees to $11.1 billion, the highest since 2021.
SpaceX's IPO generated a record $500 million in fees for 23 banks, with Goldman Sachs and Morgan Stanley each earning $100 million, driving equity capital markets fees to $2.5 billion.
Combined Q2 profit for the six largest U.S. banks is expected at about $44 billion, up 18% year-on-year, with strong equity trading and limited lending losses supporting bank shares.

Fee growth driven by listings and dealmaking

As reported by Financial Times, the five largest U.S. investment banks, JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup, are forecast to post a 27% year-on-year increase in second-quarter investment banking fees, based on estimates compiled by Bloomberg. That would bring the total to $11.1 billion, the highest level since 2021.

A major share of that increase comes from equity capital markets fees, which are expected to reach $2.5 billion across the five banks. The standout transaction is SpaceX's IPO, which generated $500 million in fees for 23 investment banks, the largest fee pool ever paid on a public offering, with Goldman Sachs and Morgan Stanley each taking in $100 million.

Bankers and analysts also point to a new group of very large technology companies that have gone public or could do so soon, including SpaceX, OpenAI and Anthropic. Smaller listings backed by private equity remain more subdued, however, as higher interest rates continue to weigh on those offerings.

Fees from mergers and acquisitions are also expected to rise sharply, climbing about 30% from a year earlier to more than $4 billion across the five banks. That keeps M&A fees above that threshold for a third straight quarter, the first time this has happened since 2021, as Wall Street benefits from a renewed flow of deals worth more than $10 billion.

Market rally supports earnings outlook

U.S. stocks post their best quarter in six years in the three months to the end of June, even as markets absorb volatility linked to the war with Iran. Optimism around AI investment, lower oil prices and signs of consumer resilience help support the rally and improve conditions for underwriting, advisory work and trading.

JPMorgan, Goldman Sachs, Morgan Stanley, Bank of America, Citigroup and Wells Fargo report earnings on Tuesday, with Morgan Stanley due on Wednesday. Together, the six banks are expected to post about $44 billion in second-quarter profit, up 18% from a year earlier, while trading businesses are also positioned to benefit from active and volatile markets, particularly in equities.

Relatively limited lending losses also support bank shares, which outperform the broader market over the past two years. Even so, investors remain focused on whether valuations leave much room for further gains and on whether U.S. consumers can continue to withstand pressure from tariffs, higher oil prices and geopolitical risks.

Analysts say any renewed escalation in the Iran conflict could quickly change that picture by pushing oil prices higher and reviving inflation concerns. That, in turn, could weaken expectations for economic growth and become a fresh risk for bank balance sheets.

Our earlier article on the second-quarter earnings backdrop for major U.S. banks highlighted forecasts for a 27% year-on-year jump in investment banking fees at JPMorgan, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup. We noted that the lift was expected to be led by stronger equity capital markets activity and a renewed flow of large M&A deals, while investors weighed how much of the improved outlook was already priced into markets.

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