November 1, 2024

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2 reasons why investment banking activity is up this quarter

2 reasons why investment banking activity is up this quarter

Major US banks have all reported their earnings. Morgan Stanley (MS) closed out the group, topping analysts’ expectations and delivering a big boost in investment banking revenue.

American Banker editor-in-chief Chana Schoenberger joins Catalysts to discuss Big Bank earnings and her major takeaways from the industry.

Schoenberger’s biggest takeaway from bank earnings is that “investment banking is up and trading is up.” She attributes this trend to two factors: the markets being up and an increase in dealmaking. She notes that M&A (mergers and acquisitions) activity has increased this year and will continue its momentum as interest rates fall.

While easing interest rates is usually bad news for banks, she notes that it’s not all negative: “When deposits come, in they have to pay money. They have to pay interest to their depositors. But then they also get to keep that spread. So a low [interest] rate environment should generally mean that things pick up in the economy and that is very good for banks.”

To watch more expert insights and analysis on the latest market action, check out more Catalysts here.

This post was written by Melanie Riehl

Video Transcript

Kicking it off with the major banks.

We’ve now heard from all of the big US banks.

Morgan Stanley closing the group with strong results, beating analysts expectations, delivering a big boost in investment banking revenue.

We’ve got the financial sector up just about 3% in the last five days on the back of solid reports from those big banks joining us.

Now we want to bring in HANNAHS.

Burger.

She is the editor in chief at American Banker, and it’s great to have you here on set with our big takeaway.

And what we’ve been talking about over the last couple of days is just this revival that we certainly have seen from some of the big banks this quarter and the optimism that they seem to be giving here some of these investors on the earnings cultures in terms of what that future growth looks like.

I’m curious.

What was your How would you sum up this Big Banks earnings season?

So it’s super interesting because investment banking is up and trading is up.

You saw this with all the big banks JP.

Morgan City, Goldman, Morgan Stanley, Morgan Stanley, helped, especially by their enormous wealth management business, and that’s because markets are up.

But it’s also because people are doing deals again.

So there was a deals just sort of happened, right?

Big deals, small deals, and you’re seeing both of them pick up.

We’re We’re anticipating a big rise in bank M and a banks buying other banks.

Credit unions, buying banks.

That’s at a record high this year.

And with interest rates falling after the September fed rate cut, we think that’s gonna continue.

What is healthy consolidation among the bank look like for you and especially, as you know, that any of the deal making activity among banks that takes more competition out of the equation that is going to be kicked at by any regulator that’s looking across these right.

It’s a heavily regulated market, so there are about 4500 banks in the US right now.

That is a huge number, but not nearly as many as there used to be.

It’s not clear that regulators really want banks to buy that many other banks.

There are a couple of deals that are are being floated right now that are you know, before the regulators, and I guess we’re gonna see what happens with those Hannah.

And this is a question we brought up with a number of the analysts.

But I’m curious to get your perspective on this just in terms of how big of a driver, or or or maybe overall, the overall impact of lower rates on some of these big banks.

Good news, bad news.

How are you looking at that?

So generally it’s bad news, but it’s also good news, right?

So they you know, when deposits come in, they have to pay money.

They have to pay interest to their depositors, but then they also get to keep that spread.

So a low rate environment should generally mean that things pick up in the economy, and that is very good for banks, as as you think about some of the regional banks that we’re set to hear from, which regional bank do you think is best positioned for this environment right now, a regional bank that might give big bank energy if you will?

I don’t know if I could pick just one.

It’s certainly clear that the 2023 regional bank crisis is well over.

The regional banks have all bounced back from that.

The ones that survived.

Which is most of them?

Yeah.

New Coined here on Yahoo Finance.

Fire up the T shirt maker, Hanna Schonberger, who is the American banker?

Editor in chief.

Thanks so much for taking the time.

Thank you.

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