Investment banks are experiencing their strongest quarter in years, with Goldman Sachs boldly predicting 2026 could deliver record-breaking M&A volumes of $3.9 trillion.
The investment banking landscape is undergoing a dramatic transformation as Wall Street’s major players report synchronized revenue growth across both advisory and trading divisions. After weathering a prolonged downturn in dealmaking activity, the sector appears poised for what could become its strongest performance cycle in recent memory.
The Numbers Tell a Compelling Story
JPMorgan Chase is leading the charge with projections for low double-digit growth in investment banking revenue and high teens growth in trading revenue for the third quarter, according to comments made by Doug Petno, Co-CEO of the bank’s commercial and investment bank, at an investor conference on Tuesday. These figures significantly outpace analyst expectations, with trading revenue growth nearly doubling the consensus forecast of 8.2%. Petno described this summer as “one of the busiest in a long time,” a sentiment that resonates across trading floors and deal teams throughout the Street, Reuters reported.
Citigroup is experiencing equally robust momentum, with CFO Mark Mason reporting “good momentum across all investment-banking products” and forecasting mid-single digit percentage growth in both investment banking fees and trading revenues during Tuesday’s Barclays financial-services conference. The bank recently posted its best second quarter for traders in five years, supported by record trading volumes that underscore the broader market’s return to active participation, Bloomberg reported.
Bank of America rounds out the triumvirate of optimism with CFO Alastair Borthwick projecting investment banking activity growth of 10% to 15% for the third quarter during Monday’s Barclays conference, positioning the bank to perform “in line” or “slightly better” than industry peers. The firm’s trading division is trending up mid-single digits compared to last year, benefiting from continued client repositioning in volatile markets, according to Bloomberg’s coverage of Borthwick’s comments.
Goldman’s Bold Vision for 2026
Perhaps most striking is Goldman Sachs’ ambitious forecast for 2026, delivered by Tim Ingrassia, the firm’s co-chairman of global mergers and acquisitions. Speaking at Goldman’s 15th Annual EMEA Credit and Leveraged Finance Conference in London on September 3rd, Ingrassia predicted deal flow could surge to $3.9 trillion in 2026, surpassing the previous record of $3.6 trillion set in 2021, according to Bloomberg’s “Going Private” newsletter.
Ingrassia’s thesis centers on the concept that “change creates M&A,” pointing to historical patterns where major disruptive events trigger substantial increases in dealmaking activity. His analysis, citing research firm Dealogic, suggests that M&A volumes typically experience approximately 30% growth following significant market disruptions, a pattern he expects to repeat as corporate America emerges from what he terms “post-liberation day.”
The Goldman executive’s confidence stems from observable changes in corporate behavior, particularly what he describes as “seller mortality” – the phenomenon where management teams reassess their strategic assumptions after realizing that earnings don’t always grow and valuations don’t perpetually increase. This introspection, combined with declining deal premiums now averaging around 20% above market value, creates fertile ground for transaction activity, Ingrassia noted during the London conference.
Market Dynamics Driving the Recovery
The current surge follows a period of significant market volatility triggered by President Trump’s tariff announcements in April 2025. While these policy changes initially disrupted deal activity, they ultimately benefited trading divisions across Wall Street as clients increased their activity levels in response to changing market conditions, according to multiple bank executives’ comments reported by Bloomberg and Reuters.
Christina Minnis, Goldman’s global head of credit finance, captured the prevailing sentiment in comments to Bloomberg TV’s Francine Lacqua: “We’ve been talking for years about the return of M&A, but what we’ve seen in terms of corporate boardrooms and sponsor willingness to transact is really picking up.” This observation reflects a fundamental shift in corporate decision-making, where boards are increasingly willing to pursue strategic alternatives after years of cautious waiting.
The recovery is broad-based, encompassing both public and private market activity. Large initial public offerings have returned with strong performance, equity capital markets are showing robust activity, and the overall pipeline quality has improved significantly, according to JPMorgan’s Petno. Mergers and acquisitions activity, in particular, is being driven by strategic consolidation needs that accumulated during the previous downturn.
Strategic Positioning and Capacity Building
Investment banks are responding to this opportunity by aggressively expanding their capabilities. JPMorgan alone added more than 300 bankers between January and April 2025 across its global banking unit, with particular focus on high-growth sectors including technology, energy, and activism defense, Reuters reported based on Petno’s investor conference comments.
The talent acquisition wars extend beyond pure headcount additions. Banks are targeting senior professionals with specialized expertise in sectors expected to drive deal activity, recognizing that the quality of advisory relationships will prove crucial as competition for mandates intensifies. JPMorgan’s Petno has already warned investors about expected increases in compensation-related expenses, signaling that talent retention costs are likely to rise across the sector.
Sector-Specific Opportunities
Technology continues to represent a significant opportunity, driven by ongoing consolidation needs and the transformative impact of artificial intelligence across industries. Energy sector activity is gaining momentum as companies pursue strategic combinations related to the energy transition, while healthcare deals are benefiting from a more supportive regulatory environment, according to the various bank executives’ conference presentations.
The geographic dimension adds another layer of complexity and opportunity. Goldman’s decision to host its major credit conference in London signals renewed focus on European deal activity, while cross-border transactions are increasing as companies restructure supply chains in response to evolving trade policies, Bloomberg’s coverage of the London event noted.
Navigating the Risks
Despite the optimistic outlook, several risk factors warrant attention. Interest rate volatility continues to influence large-scale capital decisions, particularly for transactions requiring substantial financing. Bank of America’s Borthwick noted during the Barclays conference that companies must “look through some of the interest rates to think about what does that mean for the long term, before you commit to a large-scale capital program, or before you commit to a sale or a purchase.”
The medium-term risk profile centers on execution capabilities and market dynamics. If Goldman’s ambitious 2026 forecast proves accurate, the industry may face capacity constraints that could pressure fee structures and deal execution quality. Conversely, if volume expectations prove overly optimistic, banks may find themselves with excess capacity and elevated cost structures.
The Path Forward
The convergence of immediate quarterly strength and longer-term structural optimism positions the investment banking sector for what could be its strongest performance cycle in years. Bank of America’s Borthwick perhaps summarized it best when he noted during Monday’s conference that “there is an awful lot of firepower out there to transact,” referring to the combination of corporate cash reserves, private equity dry powder, and renewed strategic ambition that characterizes the current environment.
For investment banking professionals, the message is clear: the drought is ending, and 2026 may mark the beginning of a new golden age for dealmaking. The question is no longer whether the recovery will materialize, but rather which institutions will be best positioned to capitalize on what promises to be an unprecedented surge in transaction activity.
As banks prepare their organizations for this anticipated volume increase, the focus has shifted from survival to growth, from capacity preservation to aggressive expansion. In this context, Goldman’s $3.9 trillion forecast represents more than mere optimism – it signals a fundamental belief that the structural changes reshaping corporate America will drive dealmaking activity to levels that surpass even the frenzied pace of 2021.
Sources: Reuters interview with JPMorgan’s Doug Petno (September 9, 2025); Bloomberg coverage of Citigroup CFO Mark Mason at Barclays conference (September 9, 2025); Bloomberg coverage of Bank of America CFO Alastair Borthwick at Barclays conference (September 8, 2025); Bloomberg “Going Private” newsletter coverage of Goldman Sachs’ Tim Ingrassia at EMEA Credit Conference (September 3, 2025); Bloomberg TV interview with Goldman’s Christina Minnis