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JPMorgan Chase and investment banking boutique Evercore have displaced Morgan Stanley as the chief rivals to Goldman Sachs in the core Wall Street business of dealmaking advice.
JPMorgan generated financial advisory fees last year — including mergers and acquisitions — of $3.29bn, while Evercore recorded $2.45bn and Morgan Stanley $2.38bn.
M&A fees are volatile between quarters and even years, because they can run to the tens of millions and are in general only paid when a deal closes. But the fees for 2024 confirm a shift in Wall Street’s pecking order in the past decade, with the arrival of JPMorgan, traditionally a top lender to companies, as well as upstarts such as Evercore as major boardroom players.
Goldman Sachs has long dominated the business of advising chief executives on deals. The latest data indicate that JPMorgan has cemented its position as the second-biggest earner, however, after duelling with Morgan Stanley through the 2010s.
Last year JPMorgan narrowed the gap with Goldman to its smallest in at least a decade. In the fourth quarter it reported $1.06bn in advisory fees — excluding revenues from equity and debt underwriting — beating Goldman for the second time in a year.
Evercore recorded $850mn in fees for the quarter, and Morgan Stanley just $779mn.
M&A remains the crown jewel product in investment banking, with high stakes transactions attracting commensurate fees. At the same time, M&A advice requires only a handful of bankers, unlike initial public offerings or bond issues which demand armies of personnel.
“You are providing advice that is not a commodity,” said Devin Ryan, an analyst at Citizens JMP Securities. “And so therefore the fees on transactions have not come under pressure, like a lot of areas within financial services.”
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The changing of the Wall Street guard has unfolded as Morgan Stanley has focused resources on building up the wealth management business, where it earns steady fees that are prized by investors.
Morgan Stanley has been a traditional investment banking blue blood, spun out of JPMorgan 90 years ago in the wake of the Glass-Steagall Act that separated commercial from investment banking. Among its alumni are Joe Perella, Bob Greenhill, Frank Quattrone and Paul Taubman, each of whom founded well-regarded boutique banks.
Its wealth management strategy was, however, championed by former chief executive James Gorman, who retired from the role at the end of 2023. His successor, Ted Pick, previously ran Morgan Stanley’s investment bank, raising hopes among the firm’s dealmakers that he would direct more resources towards them.
“There was a lot of relief that Ted became CEO from our side of the bank rather than a guy from investment or wealth management,” said one Morgan Stanley investment banker.
However, bankers often work for years to foster the corporate relationships that can yield the industry’s lucrative fees, requiring a long-term commitment to investment banking.
“Whatever deals happen this year, you earned them three years ago,” said one former senior investment banker at a large Wall Street firm.
JPMorgan has also invested heavily in its M&A business, using the wide range of products it offers to muscle its way into lucrative advisory mandates.
“At some point they got much more aggressive about saying ‘hey, we’re your biggest lender, so you should be giving us your advisory business’,” said one Wall Street chief executive.
In 2023 the bank told investors it had earmarked $200mn to hire “revenue producers” at its corporate and investment bank. Jamie Dimon, the bank’s longtime chief executive, is known to call coveted clients personally to make JPMorgan’s case.
“JPMorgan has been very consistent and very dedicated to growth in the investment bank,” said Ryan of Citizens.
Evercore has been among the biggest winners among a new clique of boutiques that do not offer lending or trading services, landing major mandates including on the $29bn sale of Calpine to Constellation Energy.
It has also expanded its advisory business beyond corporate M&A to private funds transactions and restructuring advice, where there is less competition from large investment banks.
“They’ve done a lot to build out their franchise and establish themselves as a premier boutique investment bank,” said Aidan Hall, an analyst at Keefe, Bruyette & Woods.
Other challengers such as Jefferies have also taken advantage of the shifts on Wall Street to seize ground in investment banking. Jefferies reported $1.8bn in advisory fees for the year to November, beating bulge bracket banks Bank of America and Citigroup after a recent hiring spree.