By Arasu Kannagi Basil and Prakhar Srivastava
Oct 14 (Reuters) - Wall Street banks struck an optimistic tone on investment banking activity, citing robust deal pipelines and continued client engagement, even as rising bond yields and market volatility threaten to delay transactions.
Top banking executives said this week the environment for investment banking remains solid as businesses look to get deals done, with strategic dialogue inside corporate boardrooms remaining active.
"Given the rate selloff,
you're going to have the market take a little bit of a breath and a pause to make sure buyers and sellers can meet on valuation terms. We did see a little bit of that slowdown in the second half of September," JPMorgan Chief Financial Officer Jeremy Barnum said.
"Big picture, I would lean more on the side of delayed rather than canceled. There are a lot of deals that need to get done that want to get done."
Investment banking fees rose across most major US banks in the third-quarter, with Bank of America emerging as the outlier.
"It's a solid pipeline. The US is the center of the action for both advisory and capital markets. We're seeing a bit of pickup in Europe and Asia, but a lot of this is about the US," Citigroup CEO Jane Fraser said.
The overall sentiment for dealmaking is constructive, Fraser said, pointing to continued capital expenditure and elevated strategic discussions among clients.
From tariffs to the conflict in the Middle East, Wall Street's investment banking machine has navigated several roadblocks over the past year and so, prompting brief bouts of caution but none have proved enough to derail the dealmaking recovery.
"Strategic investors have resumed discussions for deals over the last weeks," said Morgan Stanley CFO Sharon Yeshaya.
"From a strategic M&A perspective, the window is we have an administration for 2.25 or more years. There's an enormous amount of dialogue that continues. Our backlog is incredibly robust," Goldman Sachs CEO Solomon said, pointing that companies are very front-footed to seize on a more friendly regulatory environment.
Despite strong deal pipelines, Wall Street analysts remain cautious about near-term investment banking activity as higher borrowing costs and valuation uncertainty threaten to delay transactions.
Global M&A volumes fell 41% from the prior three months to $993 billion in the third quarter, falling below $1 trillion for the first time since the second quarter of 2025 as the number of megadeals shrank, LSEG data showed.
IPO MARKET FACES FRESH HURDLES
US IPO activity has lost momentum since the summer, as volatile markets and valuation concerns make investors more selective and complicate plans to go public.
A string of postponements by high-profile hopefuls, including nuclear technology company Holtec and smart ring maker Oura, has weighed on the fall IPO market. SoftBank-backed SB Energy has also delayed launching its US IPO roadshow.
"Things got a little bit softer in September. The IPO market was wide open. It's just if you expected a valuation and you got something 10% to 15% less," Goldman's Solomon said. Morgan Stanley's Yeshaya said that transactions may come back when companies are more comfortable with new valuations.
The IPO window has also narrowed, with biotech among the few sectors still drawing interest as investors become more selective in a higher-rate environment.
"In terms of the pipeline, equity markets is more follow-on driven. The IPO market continues to be a bit more selective, so certainly an option for issuers with durable earnings," Citigroup's Fraser said.
IPOs typically require stable investor appetite and supportive market conditions for companies to achieve their desired valuations. Higher inflation and rising rates also make growth stocks look more expensive and increase the cost of debt.
"Taking a step back, anyone with high expectations will be disappointed by Q4's IPO activity. To some extent that's true of 2026 as a whole," said Matt Kennedy, senior strategist at Renaissance Capital, a provider of IPO-focused research and ETFs.
"Companies are still filing. Admittedly, that can change, and rising rates are new and meaningful headwinds. An end to the Iran war would be the largest potential catalyst to the upside, but that's impossible to predict."
(Reporting by Arasu Kannagi Basil and Prakhar Srivastava in BengaluruEditing by Nick Zieminski)
