GS Sees M&A Momentum to Continue in 2026: Implications for Its IB Fees

Core Insights - Goldman Sachs Group's CFO, Denis Coleman, expressed strong confidence in the continuation of global mergers and acquisitions (M&A) momentum into 2026, which is crucial for the investment banking business [1] M&A Activity and Financial Performance - In 2025, Goldman Sachs' M&A team has advised on $1.1 trillion in M&A volume, positioning the year to potentially be one of the largest for announced M&A on record. This has led to a 31% year-over-year increase in M&A advisory fees to $3.37 billion in the first nine months of 2025 [2] - Equity and debt underwriting fees increased by 7% and 11% respectively, contributing to a 19% year-over-year rise in overall investment banking fees [2][11] Market Conditions and Outlook - The deal-making environment has improved due to a resilient economy, lower financing costs, and renewed corporate confidence, which has encouraged larger strategic deals. The anticipated business-friendly policies under the Trump administration have further bolstered management confidence [3] - The Federal Reserve's third consecutive 25-basis-point rate cut has enhanced financing conditions, likely accelerating deal execution by encouraging companies to pursue previously postponed M&A and capital-raising plans [4] Future Projections - Goldman Sachs expects a positive outlook for the equity underwriting calendar, with continued strong activity anticipated in 2026 [4] - The combination of growing M&A deals, a rising IPO pipeline, and a strong advisory backlog positions Goldman Sachs to maintain solid investment banking performance moving forward [5] Competitive Landscape - Other major investment banks like JPMorgan and Morgan Stanley are also expected to benefit from the ongoing M&A momentum and favorable macroeconomic conditions [6] - In the first nine months of 2025, JPMorgan's investment banking fees rose 12.3% year-over-year to $7.3 billion, while Morgan Stanley's IB revenues increased by 15% year-over-year to $5.2 billion [7][8] Valuation and Earnings Estimates - Goldman Sachs shares have increased by 51.4% over the past year, outperforming the industry growth of 33.3% [9] - The company trades at a forward price-to-earnings (P/E) ratio of 16.3X, above the industry average of 15.1X [13] - The Zacks Consensus Estimate for Goldman Sachs' earnings implies year-over-year increases of 20.6% and 12.2% for 2025 and 2026 respectively, with sales estimates also showing growth [15]