A broad revival in investment banking is taking hold on Wall Street, fueled by a surge in initial public offerings (IPOs), mergers, and debt issuance. The biggest US 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 Soar

Investment banking fees at the six largest US 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.

IPOs Drive Growth

US 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 mergers and acquisitions.

Wall Street is also preparing for the US 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.

Dealmaking Boom

Announced global mergers and acquisitions 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.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.