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- Wall Street banks are rallying on a 'tale of 2 quarters'</p>
<p>David HollerithJune 30, 2025 at 2:00 AM</p>
<p>The stocks of the biggest Wall Street banks are rallying at the end of the second quarter, defying the gloom that settled over the industry as the quarter began.</p>
<p>Dealmaking froze in the weeks following President Trump's April 2 "Liberation Day" tariff announcement, but has since recovered on the back of some red-hot IPOs and sizable mergers.</p>
<p>"I do think investment banking specifically is a tale of 2 quarters, one that started slow, really pausing in a big way and now it's picked up," Morgan Stanley (MS) CEO Ted Pick said at a conference hosted by his firm in early June.</p>
<p>The stock of the largest US bank, JPMorgan Chase (JPM), reached a record high at the end of last week and could go higher this week after JPMorgan, Morgan Stanley and 20 other big banks passed an annual Federal Reserve stress test.</p>
<p>The results of that test released Friday demonstrated that all big banks have enough of a buffer to withstand a severe recession, boosting their case for dramatic rollbacks in capital rules and other regulatory constraints from the Trump administration.</p>
<p>Investors in bank stocks are also encouraged by a bounce back of M&A and IPOs in May and June after virtually all activity came to a halt in April. About 30% of companies said in a May PwC survey that they paused or revisited pending deals due to tariffs.</p>
<p>Worldwide investment banking revenue since the start of 2025 through June 27 — $44.8 billion — is slightly higher compared to the first two quarters of last year, according to Dealogic data. The second quarter by itself is down 4% from the same period last year.</p>
<p>Certainly there are also some reasons for unease as banks continue to face a number of unknowns after the run up in their stocks. Most big banks are near or have exceeded their 2025 highs initially set in the weeks after Trump's inauguration.</p>
<p>Baird analyst David George offered some caution last week when he downgraded JPMorgan from neutral to underperform.</p>
<p>"We realize we are fighting the tape here, and understand that JPM is a best-in-class franchise, with dominant share in all of their businesses," he said in a note, adding that "we simply think that expectations are super high here."</p>
<p>'A noticeable increase in momentum'</p>
<p>The banks' tale of 2 quarters is expected to show up in the earnings of the biggest banks on Wall Street when they start to report their second-quarter results in two weeks.</p>
<p>Collectively, investment banking revenue at Bank of America (BAC), JPMorgan, Goldman Sachs (GS), Morgan Stanley and Citigroup (C) is expected to fall 6% from the year ago period to $7.7 billion, according to analyst estimates.</p>
<p>One early sign of what investors may see in those results came last week when a smaller Wall Street investment bank, Jefferies (JEF), posted its own second-quarter earnings.</p>
<p>It noted that investment banking revenue fell 2.7% from March through May compared to the same period in 2024 as US policy and geopolitical events "meaningfully slowed activity levels for the first two months of the quarter," according to CEO Richard Handler and President Brian Friedman.</p>
<p>But then in May, they added, "some clarity came to the economy and markets, which began to restore investor confidence, and we experienced a noticeable increase in momentum."</p>
<p>They predicted good things for the rest of the year, citing a strong backlog and abundance of talk with clients. "We are increasingly optimistic about the second half of 2025."</p>
<p>Brian Moynihan, Chairman and CEO of Bank of America; Jamie Dimon, Chairman and CEO of JPMorgan Chase; and Jane Fraser, CEO of Citigroup. (Photo by Win McNamee/Getty Images) (Win McNamee via Getty Images)</p>
<p>Investors will be listening for more such guidance from Jefferies' larger rivals when the biggest banks start to report earnings on July 15-16.</p>
<p>"If you're the CEO or the board and you're sitting there trying to decide, knowing the forward outlook, having confidence in your business, having confidence in the market, is one of the biggest drivers of letting you make that informed decision," Vito Sperduto, head of RBC US Capital Markets, told Yahoo Finance earlier this month.</p>
<p>The recovery of the M&A market has been driven by big deals after the freeze-up of April. There were 33 megadeals worth $5 billion or more announced in May, something that hasn't happened since 2020, according to PwC.</p>
<p>The deals that have been announced are larger when compared to any past year going back to 1995, according to Dealogic. That is helping to offset an overall drop off in total number of deals. There have been fewer US M&A announcements so far this year than any corresponding period since 2009.</p>
<p>Many of the big deals are coming from the world of technology and more specifically, artificial intelligence. Year to date, 51% of the US M&A deals have come from tech as measured by dollars, while seven of the 15 largest over the same period were AI-focused.</p>
<p>The companies Wall Street helped go public following the freeze-up in April are also scoring big with investors.</p>
<p>"If you bought and held every IPO since May 1, you'd be meaningfully outperforming the broader market," Jim Cooney, head of the Americas equity capital markets team at Bank of America, said last week during a call with reporters.</p>
<p>Jeremy Allaire, CEO and co-founder of Circle Internet Group, celebrates as he rings the opening bell on the day of the company's IPO, in New York City. REUTERS/Brendan McDermid (Reuters / Reuters)</p>
<p>By far the two biggest IPOs this year have been AI-cloud computing startup Coreweave and stablecoin issuer Circle.</p>
<p>Coreweave's (CRWV) stock is up 310% since its March 28 IPO while Circle (CRCL) has gained 480% since going public on June 5.</p>
<p>"As long as IPOs continue to outperform, investor appetite will remain high," BofA's Cooney added.</p>
<p>David Hollerith is a senior reporter for Yahoo Finance covering banking, crypto, and other areas in finance. His email is david.hollerith at yahoofinance.com.</p>
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