Will investment banking ever come back?

The short answer is: eventually, hopefully. Dealmakers around the globe sure want it to be sooner rather than later.

Morgan Stanley’s James Gorman views the market for dealmaking as “very subdued,” the chief executive officer told analysts in a conference call this week after reporting first-quarter results. He and his rivals said investment banking fees have dropped about 20% or more from a year earlier.

“These are revenues delayed, not dead,” Gorman said. “That said, it largely remains a back-half 2023 and full-year 2024 story.”

That means it could be a long year for investment bankers. Headcount has risen at four out of five of the biggest US banks, and the slumping fees create questions about whether more dealmakers’ jobs will need to be cut if the pressures persist for that long. What’s more, many thousands of young bankers are set to descend on the industry in the coming months. Will they have jobs coming out of their internships? And is a recession on the way, and how deep will it be?

Some megamergers have been announced this year, including Pfizer Inc.’s $43 billion deal to buy Seagen Inc. We’ve seen companies that would otherwise go public sell themselves instead. But those are just glimmers of hope amid one of the worst quarters for deals in the past decade, according to my colleagues at Bloomberg Deals. We’ve previously reported, too, that young bankers who previously would’ve worked on mergers have been allocated to jobs doing restructuring or helping corporate clients clean up their balance sheets. (Very enticing, I know.)

One positive sign for dealmakers is the pent-up demand from big private equity firms sitting on tons of cash. Blackstone Inc.’s Jon Gray, who’s president of the largest alternative asset manager in the world, says his firm has a record amount of unspent money. That’s almost $200 billion that can be put to work. “It's going to take some stability in markets, certainly getting past this inflation,” he says. “Hopefully it happens in the back half of the year, I think at the latest, at the early part of next year.”

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