Top Wall Street Banks Rake In ECM Revenue as IPO Volume Recovers

(Bloomberg) -- Wall Street’s biggest banks anticipate there’s more to come from the boom in equity deal activity seen through the end of 2024, after clocking a sharp rise in their underwriting revenue.

Last quarter, heavyweights Morgan Stanley, Goldman Sachs Group Inc. and Citigroup Inc. posted 102%, 98% and 95% increases in equity underwriting revenue, respectively, benefiting from a revival in the initial public offering market. Chief executive officers are bullish on deal flow in 2025, betting that Donald Trump’s White House will ease regulations, spurring greater activity.

“There is an expectation that the regulatory burden will be reduced, which should serve as a tailwind to risk assets and capital deployment,” Denis Coleman, chief financial officer at Goldman Sachs said on the bank’s fourth-quarter earnings call. “We are optimistic on the outlook for 2025 and expect a further pickup in M&A and IPO activity.”

Ted Pick, Morgan Stanley’s chairman and CEO, said on its last earnings call that “there is clearly demand” for companies to IPO, saying public listings are a “real option” versus selling to private equity or another company.

“I’ve been bullish on this,” he said.

IPOs raised $54.2 billion during the fourth quarter, a 94% increase year-over-year, data compiled by Bloomberg show. Annual IPO volume rose to $145.7 billion in 2024, an increase of 6.9% versus the previous year, though still below pre-pandemic levels, the data show.

Some of the biggest fourth-quarter IPOs include Hyundai Motor India Ltd., the local arm of the South Korean automaker, Tokyo Metro Co., the Japanese capital’s transit operator, and Talabat Holding Plc, Delivery Hero SE’s Middle Eastern unit.

The surge in volume was driven by a resilient US economy and robust corporate earnings, along with optimism about lower borrowing costs as the Federal Reserve began its interest-rate cutting cycle.

While bankers expect the momentum to continue, they also see some turbulence to come from Washington as the White House’s policy agenda takes shape. The start of Trump’s second term came with a flurry of executive orders, and the president on Monday signaled that he would put 25% tariffs on goods from Mexico and Canada by Feb. 1.