How 2025’s Investment Banking Rebound Is Shaping M&A, Private Credit & Bank Risk

As investment banking managing director, several themes emerge from the current landscape. First, deal volume has rebounded sharply in 2025: global M&A surged to about US$4.5 trillion, making it the second-best year on record, with notable activity concentrated in megadeals—those upwards of US$10 billion. The returns to banks stem not only from advisory fees but also from rising underwriting activity and trading revenues tied to macroeconomic shifts.

U.S. banks, in particular, have demonstrated strong financial performance. JPMorgan’s Q3 investment banking fees rose ~16%, trading revenues reached record highs (e.g. $8.9 billion), and other large banks reported similar advances, driven by equities, fixed income, and massive underwriting deals. This reveals that scale, sector breadth, and global reach are materially advantageous in the current deal-rich environment.

Changes in the regulatory framework are playing a meaningful role. Recent rollbacks of leveraged lending guidelines by U.S. regulators have softened constraints that had limited exposure to high-risk corporate loans, especially for PE-backed firms. That relaxation increases competitive pressure and risk appetite for banks but also raises the need for strict underwriting discipline. Simultaneously, the growth of private credit—often outside bank regulatory purview—is adding both competition for deals and counterparty risk tied to hidden exposures.

Strategically, this means investment banks must balance aggressive growth ambitions against risk management imperatives. Firms with strong deal pipelines, underwriting capacity, and diversified revenues are poised to benefit most. Smaller firms or those reliant on traditional advisory without investment banking scale might find it harder to compete. Moreover, exposure to private credit failures (e.g. in subprime auto, supplier insolvency) could ripple into bank capital or credit lines unless carefully managed.

Open questions remain: how sustainable is the current momentum if interest rates stay high or inflation resurges? What is the impact of regulatory tightening in later-2025 or 2026? And how will geopolitical risks (trade wars, supply chain disruptions, regulatory nationalism) affect cross-border deals? Finally, how banks adjust operations—via tech, AI, or structural changes—to maintain margins as talent costs and competition intensify will be important.