JPMorgan Chase [EPA=Yonhap News File Photo]

Driven by the IPO of SpaceX and a revival in mergers and acquisitions (M&A), investment banking fee revenue for major U.S. banks on Wall Street is expected to reach its highest level in four and a half years for the second quarter.

According to a Financial Times (FT) report on the 13th (local time), citing Bloomberg data, the combined second-quarter fee revenue of the five largest U.S. investment banks—JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America (BofA), and Citigroup—is projected to reach $11.1 billion, a 27% increase compared to the previous year.

This marks the highest figure since 2021, which was the industry’s most recent peak.

Keefe, Bruyette & Woods (KBW) analyst Chris McGratty anticipates that revenue from the investment banking division will rise by 26% year-on-year, with trading revenue growing by 14%.

The growth was primarily led by SpaceX, which went public last month.

Equity Capital Markets (ECM) fees for the five major banks are expected to hit $2.7 billion, a significant portion of which stems from the $500 million in underwriting fees generated by the SpaceX IPO, which were distributed among 23 banks.

This is the largest fee payout ever recorded for an IPO, with Goldman Sachs and Morgan Stanley each receiving $100 million.

Goldman Sachs [AP=Yonhap News File Photo]

Beyond IPO fees, U.S. business news channel CNBC reported that the banks also secured fees for underwriting SpaceX's debt financing and gained opportunities to attract new wealth management clients from the millionaires and billionaires created by the public listing.

Noting that the stock price soared 19% on the first day of trading, CNBC added that the total benefits for Wall Street could exceed $5 billion if "soft dollars"—commissions paid by hedge funds to underwriters in exchange for share allocations—are included.

M&A advisory fees are also expected to jump 30% from the previous year, surpassing $4 billion. This marks the first time this level has been exceeded for three consecutive quarters since 2021.

In a recent client note, Morgan Stanley stated that the number of global M&A deal announcements this year is on track to reach an all-time high.

The fact that the U.S. stock market achieved its best quarterly performance in six years, even amidst volatility caused by the war in the Middle East, also contributed to the expansion of trading revenue.

Wells Fargo analyst Mike Mayo described the current situation, where both Wall Street and commercial banking divisions are growing simultaneously, as a "sweet spot" for the financial industry.

JPMorgan Chase, Goldman Sachs, Morgan Stanley, BofA, Citigroup, and Wells Fargo are all scheduled to release their second-quarter earnings on the 14th.

However, some point out that as bank stocks have outperformed the market for two consecutive years, these strong earnings may already be priced into the stock.

HSBC analyst Saul Martinez remarked, "The quarter will be good, but the market's bar has also been set quite high."