After nearly three years of sputtering performance following pandemic-era highs, Wall Street banking is experiencing a significant resurgence. Major financial institutions including Goldman Sachs, JPMorgan Chase, and Citigroup have all reported stronger-than-expected third-quarter results, signaling that the prolonged dealmaking drought may finally be ending. The revival comes as CEOs revive mergers and financing plans that had stalled during market uncertainty, creating renewed optimism across the financial sector.
Goldman Sachs Leads the Banking Recovery
Goldman Sachs emerged as the standout performer in the recent earnings season, reporting its third-highest quarterly net revenues ever at more than $15 billion. The bank’s investment banking division showed particularly strong performance, with overall fees totaling almost $2.7 billion – a remarkable 42% increase compared to the same period last year.
CEO David Solomon told investors during Tuesday’s shareholder call that mergers have returned with significant force, driving the firm’s advisory revenues 60% higher than the same period one year earlier to reach $1.4 billion quarterly. The bank’s equity underwriting revenues reached $465 million, up 21% from last year, while debt underwriting climbed 30% to $788 million. Solomon described the current environment as “constructive” and praised the “more supportive regulatory environment” for spurring renewed activity.
Major Deals Driving Goldman’s Performance
Goldman’s resurgence has been fueled by its involvement in several high-profile transactions. The firm advised on the public offerings of Klarna and Figma, both of which went public last month. Additionally, Goldman is working on the proposed $50 billion Anglo American and Teck Resources merger and Electronic Arts’ $55 billion take-private deal – blockbuster transactions announced this quarter whose fees have not yet been reflected in the bank’s current results.
Denis Coleman, Goldman’s chief financial officer, revealed that the bank’s dealmaking backlog is the highest it has been in three years across equity, debt, and advisory services. This suggests continued strong performance through the end of 2025 and into 2026, aligning with Solomon’s prediction of “a very constructive M&A environment through the end of the year into 2026.”
JPMorgan Chase Shows Strong Diversified Performance
JPMorgan Chase also demonstrated robust performance, with investment banking fees rising 16% and commercial and investment banking net revenues reaching nearly $20 billion for the quarter. CEO Jamie Dimon noted that “ECM and M&A activity picked up against a supportive backdrop,” highlighting the improved market conditions driving the bank’s performance.
Kenneth Leon, director of equity research at CFRA Research, commented that “the quarter showcased the strength of JPMorgan’s diversified business model, with all major segments contributing to growth. We think this will lead the momentum for the rest of 2025 and into 2026.”
Cautious Optimism from JPMorgan Leadership
Despite the positive results, JPMorgan CFO Jeremy Barnum struck a cautious note during the earnings call, warning that market prospects “could change overnight.” He specifically highlighted potential risks from a continued government shutdown, which could stall capital markets and public issuance activity – potentially hurting ECM bankers who specialize in taking companies public.
However, Barnum also noted encouraging signs, stating that the rebound in lending is “mirroring the pickup in deal activity across our investment-banking businesses.” He added that “we’re starting to see more M&A activity,” citing “the busiest summer we’ve had in a long time” and a rate environment conducive to dealmaking.
Citigroup’s Investment Banking Renaissance
Citigroup generated more than $1.1 billion in investment banking fees, representing a 17% increase from the previous year. The bank’s investment banking unit has experienced a surge of ambition under new leadership, with Viswas Raghavan – a former JPMorgan dealmaker who joined Citi last year as executive vice chair and head of banking – driving renewed momentum.
The bank saw corporate lending revenue increase nearly 40% as clients returned to tap its balance sheet, signaling renewed confidence in the market. This performance comes amid broader industry trends showing increased deal volume, with LSEG data indicating that deals worth $5 billion or more have surged 64% from last year.
Broader Market Context and Industry Trends
The banking resurgence occurs against a backdrop of significant activity across Wall Street and the broader technology sector. Recent developments including Macrohard’s AI initiatives, Apple’s streaming service rebranding, and Apple’s record third-quarter performance have created additional momentum in the markets. Meanwhile, Microsoft’s upgrade initiatives and regulatory challenges highlight the dynamic environment in which these banks are operating.
Staffing and Compensation Trends Reflect Recovery
The banking recovery is also manifesting in human resources trends, with executives at multiple institutions citing higher compensation and “growth in front office employees.” This represents a significant reversal from earlier this year, when JPMorgan’s Barnum said leadership had told managers to “resist hiring” and try to accomplish more with fewer resources.
The improved staffing outlook suggests that banks are preparing for sustained dealmaking activity, with hiring and compensation trends often serving as leading indicators of industry health. The combination of increased transaction volumes, client borrowing activity, and strategic hiring points to a banking sector that is positioning itself for continued growth through 2026.
Market Reaction and Future Outlook
Despite the strong earnings reports, market reaction was mixed on Tuesday morning. Goldman and JPMorgan shares slid more than 2% alongside a broader market sell-off, while Citigroup rallied roughly 2%. This divergence highlights that while fundamental banking performance is improving, external market factors continue to influence investor sentiment.
Industry observers note that the current recovery appears more sustainable than previous false starts, with multiple quarters of strengthening performance and growing deal backlogs supporting optimism for continued momentum. The combination of supportive regulatory environments, conducive interest rate conditions, and renewed corporate confidence suggests that the current banking revival may have staying power through the remainder of 2025 and beyond.
