Banks Ride M&A Momentum in Late 2025: Gains, Costs, and Talent in Focus

The current investment banking environment is characterized by strong bifurcation: advisory fees and M&A pipelines are resurgent, while market revenues and cost pressures present counterbalancing challenges.

On the fee income front, Citigroup’s CFO Mark Mason has forecasted investment banking fees climbing by approximately 25% year-over-year in Q4 2025, citing active momentum in mergers and acquisitions [1]. In contrast, Bank of America’s CEO Brian Moynihan expects investment banking fees to remain roughly flat in the same period, despite expecting markets revenue growth of around 10% [2]. This disconnect suggests banks with deeper exposure to advisory and equity capital markets are benefiting more from the rebound than those more weighted toward traditional debt underwriting or trading, especially where market volatility persists.

Regulatory shifts are magnifying opportunity. U.S. regulators have relaxed sections of the 2013 leveraged lending guidelines, giving banks more latitude to underwrite high-multiple corporate loans—including deals backed by PE sponsors or unprofitable tech firms—which were once off limits due to conservative caps. The rollback is seen as part of a trend toward deregulation under the current administration [3]. Banks’ regulatory advantage and capital adequacy positions will become crucial differentiators.

Human capital is a pivotal battleground. In order to meet surging deal flow—particularly in sectors like technology, healthcare, renewable energy—banks such as Goldman Sachs, BNP Paribas, and UBS have embarked on aggressive hiring of senior bankers to build sector specialized teams [5][6]. Pay-for-performance remains the favored model, reinforcing pressure to generate high returns per head.

However, rising costs are posing risks. JPMorgan anticipates spending about US$105 billion in 2026—above earlier forecasts—as the bank increases investments in branches, AI, marketing, and advisor incentives while contending with inflation and regulatory demands [7]. The margin squeeze from input cost inflation and funding pressures might offset gains from increased fee activity unless productivity gains or operating efficiencies are achieved.

Strategically, banks that articulate clear sector plays (e.g., renewable energy, healthcare, tech) with strong talent rosters, lean structures, and robust capital buffers are likely to outperform. Conversely, those burdened by higher fixed cost bases, weaker advisory platform position, or underinvestment in risk controls may find this environment challenging.

Open questions remain about sustainability: how long regulatory tailwinds will last; whether deleveraging pressure or macro instability (e.g., interest rates, geopolitical risk) will chill deal activity; and whether client behavior holds up if rate cuts are delayed or economic growth slows.