Wall Street's investment banking machine firing on all cylinders

Announced global M&A volumes have hit over $3 trillion so far in 2026, climbing more than 40% from a year earlier, according to Dealogic. "Client engagement remained broad-based with activity across capital markets, strategic transactions, liquidity management," Bank of America Chief Financial Officer Alastair Borthwick told analysts on a call. Technology companies, particularly AI firms and the "picks-and-shovels" businesses supplying the computing infrastructure needed to support the AI boom, have dominated activity in 2026. Activity also accelerated in the healthcare, utilities and energy sectors. "The pipeline remains quite robust, and the current activity levels seem to be encouraging more activity," JPMorgan CFO Jeremy Barnum said. Morningstar analysts said the "investment banking super-cycle" appears to have room to run, though the business remains inherently volatile. The research firm added it does not expect a "material contraction" until 2028 or later. U.S. initial public offerings raised a record $104.8 billion in the second quarter, according to Renaissance Capital, driven by the historic listing of Elon Musk's SpaceX. The resurgence also reached sponsor-backed companies, as several private equity and venture capital-owned firms returned to public markets. That reopened an important exit channel for financial sponsors, many of whom had been forced to hold portfolio companies longer than expected while the IPO market remained subdued. "As we enter the second half, the pipeline looks healthy," Citigroup CEO Jane Fraser said, adding that the bank is looking to invest in talent to fill gaps that would help it gain market share, including in M&A. Wall Street is also preparing for the U.S. IPOs of Anthropic and OpenAI, which have filed confidentially. Reuters has reported the listings could come as soon as this year, and analysts expect each company to be valued at around $1 trillion. Mega IPOs are typically among Wall Street's most lucrative mandates, generating hundreds of millions of dollars in fees while often leading to years of additional business, from capital raising to mergers and acquisitions advisory. A broad revival in investment banking is taking hold on Wall Street, fueled by a surge in IPOs, mergers and debt issuance. The biggest U.S. banks said this week that deal activity is strengthening across their investment banking businesses, suggesting the broad-based recovery that has eluded the industry for years is gaining momentum. Investment banking fees at the six largest U.S. banks surged 45% on average in the second quarter from a year earlier, with Morgan Stanley reporting the strongest percentage growth. "Even with very strong investment banking revenues this quarter, our backlog increased to its highest level in five years and its second highest level on record, underpinned by a record advisory backlog," Goldman Sachs CEO David Solomon said on a call with analysts on Tuesday. Years of elevated interest rates, market volatility and tougher regulatory scrutiny kept companies from pursuing deals and public listings. More recently, conflict in the Middle East and uncertainty over AI's economic impact prompted a brief bout of caution, but neither proved enough to derail the recovery. Expectations of stronger investment banking profits have helped lift Wall Street bank shares this year, although the increases are more modest than in recent years due to concerns about high valuations. "Investment banking divisions experienced their strongest fee-generating quarter since the peak of 2021," said David Wagner, head of equities and portfolio manager at Aptus Capital Advisors, which holds several bank stocks. "The major investment banks comfortably cleared Wall Street's profit forecasts by wide margins, signaling one of the most bullish dealmaking environments the sector has seen in years."

Wall Street's investment banking machine firing on all cylinders

Dealmaking activity stays broad-based

IPOs reopen exit channels for sponsors

Investment banking boom lifts bank results

Bank shares benefit from stronger fee outlook

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