Wall Street’s AI party is an exclusive affair
XLF•Wall Street’s AI-driven deal recovery looks uneven
Brian Moynihan knows how to spoil a party. Speaking at an investor conference this week, the Bank of America chief executive predicted that investment banking fees will fall about 10% industrywide in the third quarter, with his firm faring even worse. It’s a surprisingly dour note as high-tech fervor seizes markets. Yet it makes sense: fewer and larger deals, a private equity slump and concentration in artificial intelligence are set to widen the gap between Wall Street’s top consiglieri and everyone else.
Investors have seemed confident of an impending boom in transactions. Shares of Goldman Sachs, home to leading deal advisers, have surged. Lenders with smaller investment banking franchises, like Wells Fargo, have lagged. Moynihan's comments, though, suggest that the industry’s recovery is not unfolding as broadly as might be expected.
Private equity weakness and larger deals are concentrating fees
The biggest disappointment is private equity, which for much of the past two decades has reliably generated fees for banks large and small. In the second quarter, the volume of deals driven by buyout barons fell 37% from a year earlier, according to PitchBook. These transactions have traditionally been accessible to a wider range of banks because relationships often matter more than deep industry expertise. They also tend to rely heavily on financing, allowing lenders with large balance sheets to compete effectively.
