With every U.S. bank having reported first quarter earnings, one thing has become clear: M&A activity is officially back. The value of the deals announced during the first three months of the year was the highest since 2007, before that whole financial crisis thing.
The strength of the mergers and acquisitions market wasn’t punctuated until late last week, when Goldman Sachs and Morgan Stanley reported. While posting a decline in year-over-year earnings, Goldman saw its investment banking revenue increase 13% to $1.8 billion, the most since 2007, according to the Wall Street Journal. The reason for the jump: a massive 41% rise in advisory revenue.
Morgan Stanley was nearly as impressive, with a 34% increase in advisory fees. The news comes just a week after J.P. Morgan reported relatively lousy earnings that were saved, to a degree, by a 50% rise in M&A revenue. Bank of America was also strong, booking $286 million in advisory fees, up from $257 million a year ago. Citigroup was the sole black sheep of the group, posting a 14% drop in year-over-year M&A revenue.
The rebound in M&A activity is helping Wall Street banks make up for the massive losses they’ve been incurring in fixed income, both in terms of revenue and headcount. While traders are being let go in droves, banks hired in M&A throughout the quarter, both in the U.S. and in Europe, although mostly on the junior side.
Expect the activity to remain strong. Goldman, Morgan Stanley and J.P. Morgan hinted that their M&A pipelines look promising.
The price of rental apartments in New York continues to escalate, even though banking compensation has remained relatively flat. Unless you want to be in mountains of debt, you may want to be rather judicious when it comes to searching for a place to live.
Goldman Sachs cut pay per head by 9% in the first quarter after seeing a dip in earnings. In perhaps a worse sign, Morgan Stanley also cut compensation costs at its investment bank after seeing an increase in profit.
Barclays will sit down with analysts and investors on May 8 to update them on the bank’s cost control plans and the “positioning” of its investment bank. Barclays is reeling after posting poor year-end results while increasing compensation.
After much speculation, Goldman Sachs said it has “no strategic plans” to close its dark pool trading venue, Sigma X.
Credit Suisse is preparing to make cuts to its fixed income business after a difficult first quarter.
Libya’s $66 billion sovereign wealth fund plans to hire outside advisors to help it manage its money. You can probably cut Goldman and SocGen from the list of potential suitors. The Libyan Investment Authority is suing the two banks for losses the fund incurred on their watch.
With its management shuffling completed, Blackrock went back to doing what it does best: making money. The asset manager saw a 20% spike in earnings during the first quarter as fee revenue rose yet again.
Buzz Around the Office
Normally a Florida man being arrested for drug possession wouldn’t be headline-making news…unless his legal was Edward Cocaine.
Quote of the Day: “In a tough economy, or because of family pressures, you may not always be able to take a risk with a job choice. And, no doubt, we’ve all settled at various times. But, don’t let necessity in a given moment become the excuse for a lifetime of inertia.” – Lloyd Blankfein