Big banks ride tech boom as trading and deal fees surge

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Banks ride tech boom

Highlights

Bank of America posts a 15% year-on-year rise in quarterly revenue and a 22% jump in fees and trading income, fueled by technology-sector activity.
Equity trading at Bank of America, JPMorgan, Citigroup, and Goldman Sachs grows by $9 billion year-on-year, contributing to a $21 billion overall increase in trading revenue.
Jamie Dimon projects $1 trillion in capital expenditure on AI next year but signals caution as large banks approach pre-2008 price-to-book multiples, raising concentration and valuation risks.

Tech-driven earnings momentum

As reported by Financial Times, large U.S. banks including Bank of America, JPMorgan, Citigroup and Goldman Sachs are benefiting from a wave of technology-related market activity that is lifting trading desks, advisory work and parts of corporate lending.

Bank of America posts a 15% year-on-year rise in quarterly revenue, matching the growth rate analysts expect from Microsoft later this month. In fees and trading income alone, the bank grows 22%, outpacing Google, underscoring how the current tech cycle is feeding through to financial institutions as well as Silicon Valley.

The biggest boost goes to equity trading. Revenue at the four banks rises by $21 billion from a year earlier, with $9 billion of that increase coming from facilitating stock trades. Goldman Sachs and Bank of America both set records, helped by index rebalancing, sharp moves in software shares, Asian chip trading activity and active hedge fund positioning.

Investment banking also contributes materially, adding $4 billion to the group’s growth. SpaceX stands out in deal flow, while broader advisory and underwriting fees move back toward the levels seen in 2021, with income from M&A advice increasing at all of the banks except Citigroup.

Rising dependence on AI spending

Beyond markets activity, AI and technology investment are supporting debt issuance, wealth management and corporate lending. Large cloud companies such as Google and Amazon are driving bond markets with sizable issuance, while affluent tech employees and investors help sustain wealth businesses, and data centre spending supports demand for loans.

Even so, the scale of the benefit remains difficult to isolate. JPMorgan chief executive Jamie Dimon says capital expenditure on AI could reach $1 trillion next year, roughly a quarter of all capital spending, but notes that it is hard to separate what is strictly AI-related from broader investment. Apollo chief economist Torsten Sløk describes AI as "the one thing holding up both the economy and markets".

That dependence also creates new risks. IBM says some clients are delaying software purchases to afford more expensive hardware such as servers, storage and memory, a sign that company budgets remain limited even if AI demand stays strong.

Bank executives are signalling caution as valuations climb. Dimon has previously warned that JPMorgan is "over-earning", and says credit conditions can strengthen and weaken over time, while the bank’s finance chief points to aggressive "relationship lending" by some rivals to finance data centres. With large banks now trading at price-to-book multiples not seen since before the 2008 financial crisis, the sector’s stronger balance sheets offer protection, but the tech boom is also creating a fresh concentration risk across the wider economy.

In our earlier article on Wall Street banks’ AI infrastructure financing boom, we explained how the race to build data centers and AI capacity was translating into more equity and debt issuance, larger loan demand, and a stronger advisory pipeline for major banks. We also noted that banks were already collecting sizable fees from AI-linked transactions and that the upswing was spreading beyond core AI firms into the broader supply chain, even as executives cautioned the cycle could prove volatile.

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