2025 Investment Banking: Trends (Year-End Review)

In this year-end review of the Investment Banking industry, we summarize the developments of each quarter for the year 2025, starting with emerging trends from Q3 2024.

Q3 2024 Trend: A Tentative Thaw After the Deal Drought, But Still a Pipeline-Driven Market

Q3 2024 marked the first quarter in nearly two years where investment banking activity showed signs of stabilisation rather than continued deterioration, though the recovery was uneven and highly conditional. 

35-40% below 2021 Averages

Globally, announced M&A volumes rose modestly to roughly USD 680–700 billion, up about 10–12% quarter-on-quarter, but still nearly 35–40% below 2021 averages. The improvement was driven less by new deal origination and more by the reactivation of transactions delayed through 2022–2023, particularly in infrastructure, insurance brokerage, energy services, and select technology carve-outs.

Advisory Pipelines - Fragile

Advisory pipelines remained fragile. Most large banks reported that fee recognition was increasingly back-end loaded, with mandates signed earlier in the year only beginning to convert. 

Equity capital markets – muted at Under 25 billion USD

Equity capital markets remained constrained: global IPO issuance stayed muted at under USD 25 billion, and most listings were regional or sector-specific rather than broad reopenings. 

Debt Market Resilient

Debt capital markets were more resilient, supported by stabilising Treasury yields and modest tightening in credit spreads, which allowed banks to execute refinancing, liability management, and investment-grade issuance.

Advantage Large-Cap Clients

A defining feature of Q3 2024 was the growing bifurcation between large-cap strategic clients and the middle market. Large corporates, particularly in North America, cautiously resumed M&A discussions as rate volatility eased, while mid-market clients remained largely sidelined due to financing uncertainty and valuation gaps.

US Dominated – 55% Global IB Fees

Regionally, the U.S. accounted for over 55% of global IB fee pools, while Europe lagged due to weak growth expectations, and Asia remained subdued amid China’s regulatory overhang. Banks entered Q4 2024 with improving sentiment, but still without conviction that deal momentum would sustain without clearer macro and policy signals.

Q4 2024 Trend: Earnings Strength Masks Structural Fragility in Core IB Activity

Q4 2024 delivered headline strength for major U.S. banks, but beneath the surface, investment banking remained structurally constrained. 

M&A Subdued, Trading Revenue High

JPMorgan, Goldman Sachs, Citi, and BlackRock posted record or near-record profits, driven primarily by net interest income (NII) and trading revenues, not by a broad revival in M&A or underwriting.

Higher interest rates continued to support net interest income

JPMorgan reported USD 23.35 billion in NII, while Citi posted a 62% year-on-year increase in net interest revenue. 
Trading desks were another critical earnings stabiliser. Goldman Sachs recorded a 23% increase in overall revenue, driven by equities and fixed income trading amid heightened market volatility. 

JP Morgan – 46% Increase in IB Revenue (from Delayed Execution, Not New Deals)

Investment banking revenues did improve year-on-year, with JPMorgan reporting a 46% increase in IB revenue, but this reflected execution of delayed ECM, DCM, and advisory mandates, not a surge in new deal origination.

M&A volumes improved modestly, but deal sizes skewed large and sector-specific. Infrastructure, insurance, energy transition, and select technology assets dominated activity. 

Equity issuance remained selective, while leveraged finance stayed constrained due to cautious lender sentiment. 

Private credit increasingly substituted for traditional syndicated loans, reducing banks’ balance-sheet exposure but also shifting fee pools away from traditional DCM.

Deals in ESG

A key structural shift in Q4 2024 was the deepening role of ESG, energy, and infrastructure financing. 

Banks were increasingly involved in complex capital structures for renewable energy, grid expansion, and long-duration infrastructure projects, blending advisory, tax equity, and private capital solutions.

Despite strong profitability, management commentary across banks struck a cautious tone. Executives repeatedly cited geopolitical risk, fiscal uncertainty, and fragile global growth as constraints on forward deal visibility. 

Q4 2024 ended with strong earnings optics but limited confidence in a durable IB-led recovery.

Q1 2025: Advisory Fees Rebound, but New Deal Formation Remains Uneven

Q1 2025 represented a transition quarter for investment banking, where fee growth returned, but the underlying deal engine remained selective and politically sensitive. 

Industry-wide, total investment banking fees rose 4% year-on-year, with advisory fees up 6% YoY, reflecting the conversion of mandates initiated in late 2023 and early 2024.

Performance dispersion across banks was pronounced. 

Citi Emerged as an Outlier

Citi emerged as an outlier, posting an 84% year-on-year increase in advisory revenue and a 20% quarter-on-quarter rise, indicating a strong backlog of closings. Wells Fargo also reported 24% YoY fee growth, while Goldman Sachs, Bank of America, and Jefferies recorded flat or negative growth, underscoring the uneven nature of recovery.

M&A Improved Modestly

M&A sentiment improved modestly as interest rates stabilised, enabling large strategic transactions such as Arthur J. Gallagher’s USD 13.45 billion acquisition of AssuredPartners and United Rentals’ USD 4.8 billion acquisition of H&E Equipment Services. However, senior bank executives stressed that new pipeline formation remained weak, constrained by tariff uncertainty, election-year politics, and trade policy ambiguity.

Private Credit Changed traditional IB revenue composition

Private credit accelerated meaningfully. Private credit AUM is projected to reach USD 2.8 trillion by 2028. Banks increasingly acted as arrangers and advisors rather than balance-sheet lenders. This expanded fee opportunities but altered traditional IB revenue composition.

AI, Infrastructure and Energy Gained Prominence from Just Infrastructure and Healthcare Deals

Q1 2025 also saw a noticeable shift in capital markets themes. AI infrastructure and energy financing gained prominence, while equity investors rotated geographically toward Europe following Germany’s EUR 500 billion infrastructure and defense spending announcement. At the same time, AI valuation resets, and tariff rhetoric dampened enthusiasm for cross-border expansion.
Overall, Q1 2025 marked a fee recovery without a full confidence recovery. Banks were busier, but cautious, and increasingly reliant on advisory, private credit, and trading to compensate for still-fragile origination.

Q2 2025: Deal Execution Scales Up, Capital Markets Reopen Narrowly, and Fee Mix Rebalances

Q2 2025 represented the first quarter where investment banking activity shifted decisively from “pipeline recovery” to “execution normalisation,” though this normalisation was uneven across products and geographies. 

Strongest Quarter Since Q2 2022 but Driven by large-cap strategic transactions

Global announced M&A volumes rose to approximately USD 920–950 billion, up nearly 25% quarter-on-quarter, marking the strongest quarterly total since Q2 2022. However, the composition of this activity was highly concentrated: transactions above USD 5 billion accounted for over 55% of total deal value, indicating that the rebound was driven by large-cap strategic transactions rather than a broad-based mid-market recovery.

U.S-China and U.S-EU Tariff Wars Escalate

Advisory fee pools expanded materially. Across major global banks, advisory revenues grew in the high single digits sequentially, supported by the closing of long-dated mandates initiated during late 2023 and early 2024. 

Notably, infrastructure, utilities, energy transition, and insurance brokerage emerged as the most consistent fee generators. 

Cross-border M&A increased modestly

Cross-border M&A increased modestly, but remained well below pre-2022 norms due to regulatory scrutiny, national security reviews, and ongoing U.S.–China and U.S.–EU policy friction.

Debt capital markets Improved

Debt capital markets showed measurable improvement in both volume and tenor. Investment-grade issuance rebounded strongly as credit spreads tightened by roughly 40–60 basis points from Q1 levels, enabling banks to underwrite larger refinancing and acquisition-related bridge facilities. High-yield issuance reopened selectively, but leveraged finance remained constrained, with sponsor-backed LBO financing relying increasingly on private credit rather than syndicated loans. As a result, banks captured advisory and structuring fees, but lost balance-sheet-driven underwriting revenue.

IPO – Selective in AI infrastructure, grid modernisation, and industrial automation

Equity capital markets reopened cautiously. While global IPO volumes remained muted relative to historical averages, Q2 2025 saw a clear increase in follow-on offerings, block trades, and structured equity raises, particularly for companies aligned with AI infrastructure, grid modernisation, and industrial automation. Banks reported that equity mandates were heavily oversubscribed only when issuers demonstrated profitability, free-cash-flow visibility, and conservative valuation guidance. Growth-only narratives continued to be penalised.

Private Credit – Core Pillar of Investment Banking

A notable structural development in Q2 2025 was the formalisation of private credit as a core pillar of investment banking revenue. Banks increasingly acted as intermediaries between corporates, private equity sponsors, and private credit funds, earning advisory, placement, and structuring fees without deploying balance sheet capital. This shifted the revenue mix away from traditional underwriting and toward fee-based solutions, reinforcing capital-light business models.

US: 65 to 69% of Global IB Fee Generation

Regionally, the U.S. accounted for roughly 65–68% of global IB fee generation, with Europe showing incremental improvement following increased fiscal spending announcements, while Asia-Pacific activity remained uneven, constrained by China’s slowdown and weak outbound deal flow.

Q2 2025 thus marked a quantitative improvement in activity but a qualitative tightening of standards. Financing availability improved, but valuation discipline, regulatory complexity, and execution risk became the dominant advisory challenges, fundamentally altering how banks earned fees.

Q3 2025: Peak Execution, Selective IPO Reopening, and the Institutionalization of Caution

Q3 2025 became the most execution-heavy quarter for investment banking since early 2022, yet it also crystallised the industry’s long-term restraint. 

Global M&A volumes crossed approximately USD 1.05–1.1 trillion

Global M&A volumes crossed approximately USD 1.05–1.1 trillion, driven by infrastructure consolidation, energy asset rotation, sponsor exits, and AI-linked strategic acquisitions. Unlike earlier quarters, Q3 activity was less about clearing backlog and more about newly sanctioned transactions, signalling a partial restoration of corporate confidence.

Advisory revenues Peaked but Further Momentum Unlikely

Advisory revenues peaked for the cycle. Most global banks reported double-digit year-on-year growth in advisory fees, with execution driven by large strategic transactions rather than volume-heavy mid-market activity. However, bankers consistently noted that mandate pipelines remained thinner than execution levels, indicating that deal completion was temporarily outpacing new origination. This imbalance suggested that activity could plateau without a further improvement in macro and policy clarity.

IPO Market Reopened – First Momentum Since 2021

Equity capital markets reached a critical inflection point. IPO markets reopened meaningfully for the first time since 2021, but in an exceptionally narrow form. Successful listings were limited to companies with proven profitability, moderate leverage, and predictable earnings. Valuation resets were explicit: most IPOs priced at 20–30% discounts to prior private market rounds. 

Banks earned fees, but only by imposing discipline on issuers and underwriters alike. Failed or postponed IPOs reinforced that the reopening was conditional, not cyclical.

Debt markets remained supportive

Debt markets remained supportive. Investment-grade issuance stayed strong, while high-yield markets functioned intermittently. Private credit further entrenched itself as the financing source of choice for sponsor-led transactions, reducing banks’ exposure to underwriting risk but increasing their role as structurers, arrangers, and advisors across multi-layered capital stacks.

Trading revenues played stabilizing role

Continued geopolitical tension, energy market volatility, and shifting interest rate expectations sustained elevated client activity across rates, FX, and equities desks, providing earnings insulation even as investment banking revenues normalised.

Q3 2025 – Disciplined Recovery

By Q3 2025, a structural redefinition of investment banking was evident. 

Banks were no longer operating in a volume-maximisation environment. 

Instead, the industry had transitioned into a regime defined by selective deal origination, execution-heavy revenue recognition, capital-light advisory models, and strict risk control. 

The recovery was real, but it was disciplined, conditional, and structurally constrained.