Profits rocket for Wall Street banks amid corporate dealmaking boom

Morgan Stanley (MS) and Bank of America (BoA) reported strong third-quarter profits, rising 45% and 23%, respectively, fueled by a surge in Wall Street dealmaking.

BoA reported net income of $8.47 billion, while MS earned $4.6 billion, both more than $1 billion above analyst expectations.

Dealmaking fees surged 43% for BoA to $2 billion and 44% for MS to $2.1 billion. Trading revenues also increased, reflecting strong market activity.

Both banks advised on major deals, including Union Pacific’s $71 billion acquisition of Norfolk Southern and Keurig Dr Pepper’s $18 billion purchase of JDE Peet’s.

The performance comes amid a wave of mergers, acquisitions, and IPOs boosting bank activity in the US. Major banks like Goldman Sachs, JPMorgan, Citigroup, and Wells Fargo have all reported higher profits and investment banking revenues.

However, economists and bank CEOs warn of the concentration of wealth at the top.

While corporate investments are surging, consumer lending remains flat. Federal Reserve data shows the top 10% of US consumers account for nearly half of all spending, highlighting inequality in economic growth.

MS CEO Ted Pick told analysts on Wednesday that “macro uncertainty and enormous opportunity uncomfortably coexist,” while JPMorgan CEO Jamie Dimon recently warned about market valuation reaching “bubble territory.”

Analysts warn the momentum might not last, as growing risks in private credit markets and rising concerns about inflated stock prices could cool the banking sector’s success.