Key Highlights

• Goldman's Investment Banking fees rose 55% to $3.40 billion while Morgan Stanley's investment banking Revenue rose 58% to $2.4 billion.

• Morgan Stanley's Wealth Management segment generated $8.9 billion in revenue, roughly two-fifths of group revenue, cushioning its reliance on deal fees.

• Both firms raised Capital returns, with Goldman lifting its Dividend 11% and Morgan Stanley announcing a new $20 billion buyback authorisation.

Deal activity holds the spotlight because fees from mergers and capital raising rebounded sharply at both firms in the three months to June 30, 2026, lifting profits and management confidence. The Goldman Sachs Group, Inc. (NYSE:GS) reported investment banking fees of $3.40 billion, up 55% on a year earlier, while Morgan Stanley (NYSE:MS) reported investment banking revenues of $2.4 billion, up 58%. Both are S&P 500 constituents in the investment banking and brokerage sub-industry. Yet the same deal cycle matters differently to each, because Goldman leans harder on its banking and markets engine, while Morgan Stanley surrounds its deal Franchise with a much larger wealth business.

Record Quarters With Deals at the Centre

Goldman reported its second-quarter figures on July 14, 2026: net revenues of $20.34 billion, net Earnings of $6.63 billion and Diluted Earnings per Share of $20.98, with an annualised return on common Equity of 23.5%. Chief executive David Solomon described the performance as a record.

Morgan Stanley followed on July 15, 2026, with net revenues of $21.3 billion against $16.8 billion a year earlier, Net Income of $5.6 billion and EPS of $3.46, up from $2.13. Chief executive Ted Pick said active markets and consistent execution delivered record revenues and record EPS.

Investment banking was not the largest revenue source at either firm; trading was bigger. But it is the line most closely tied to boardroom confidence, and it tends to pull other revenue along with it.

How Advisory and Underwriting Reach the Bottom Line

Investment banking fees come from two main activities. Advisory fees are paid for guiding companies through mergers and acquisitions, and are largely recognised when a deal completes. Underwriting fees are earned for arranging and guaranteeing the sale of new shares or bonds, so they depend on open market windows.

The Economics are attractive when volumes rise. Senior bankers, research and technology are largely in place before a deal cycle turns, so extra fees can flow to profit at a high rate. That Operating Leverage shows up in the efficiency ratio, which measures expenses as a share of revenue: Goldman's improved to 57.4% from 63.4% a year earlier, while Morgan Stanley's fell to 65% from 71%.

Deals also feed other businesses. A completed Acquisition often needs acquisition finance, currency hedging and later refinancing, which lands in the trading and lending desks. A flotation can create newly wealthy founders and employees who need advice.

Goldman Sachs (NYSE:GS): The Deal Book as a Profit Engine

Goldman's quarterly filing splits the quarter's fees into advisory of $1.38 billion (up 17%), equity underwriting of $985 million (up 130%) and Debt underwriting of $1.03 billion (up 75%). Global Banking & Markets, the segment housing banking and trading, produced net revenues of $15.52 billion, up 53%.

The firm said it ranked first in announced and completed M&A, equity and equity-related offerings and leveraged lending. It also reported that its investment banking fee backlog, meaning estimated future fees on mandated but uncompleted deals, rose from the prior quarter, driven by advisory, even though debt underwriting Backlog fell significantly.

Roughly one dollar in six of Goldman's quarterly revenue came from investment banking fees. Asset & Wealth Management contributed $4.60 billion, up 20%, and Assets under supervision reached a record $4.04 trillion. Third-party alternatives fundraising was also a record, at $59 billion. That is sizeable, but it leaves Goldman's earnings more exposed to the deal and trading cycle than its peer's.

Morgan Stanley (NYSE:MS): Deals Inside an Integrated Firm

At Morgan Stanley, Institutional Securities generated net revenues of $11.0 billion, up 44%. Within investment banking, advisory rose to $798 million from $508 million on higher completed M&A, particularly in the Americas. Equity underwriting reached $851 million, from $500 million, on more initial public offerings, follow-ons and convertibles, and fixed income underwriting climbed to $788 million from $532 million.

The bigger difference is Wealth Management, which reported net revenues of $8.9 billion against $7.8 billion, a pre-tax Margin of 30.5% and net new assets of $148.1 billion. Client assets across wealth and investment management passed $10 trillion. That Business accounts for roughly two-fifths of group revenue, and is steadier than banking fees.

On the earnings call, Pick called the investment banking outlook constructive, saying pipelines were healthy. Finance chief Sharon Yeshaya said the full cycle of sponsor, or private equity, exits had not yet been seen.

Capital Returns Follow the Stronger Run-Rate

Both firms turned higher earnings into Shareholder returns. Goldman repurchased $4.00 billion of stock in the quarter and announced an 11% dividend increase to $5.00 per share from the third quarter, with a standardised common equity tier 1 ratio of 12.9%.

Morgan Stanley bought back $1.5 billion of shares, raised its quarterly dividend to $1.15 and announced a new $20 billion repurchase authorisation, with a standardised CET1 ratio of 14.8%. Its higher capital cushion partly reflects the different balance-sheet demands of its business mix.

What Could Weaken the Reading

Deal fees are cyclical and lumpy. Advisory revenue depends on completion timing, so regulatory delays or a collapsed transaction can move fees between quarters. Goldman's own disclosure that its debt underwriting backlog fell significantly is a reminder that not every part of the pipeline is expanding.

Geopolitics is a further risk; Pick highlighted it on the call as a defining force reshaping Supply chains and capital allocation. A sharp equity sell-off could also shut IPO windows quickly, hitting underwriting and trading together. Year-on-year growth rates of this size should not simply be extrapolated.

Finally, the headline numbers owe as much to trading as to deals. Goldman's equities net revenues rose 72% to $7.42 billion, and Morgan Stanley's equity revenues rose 69% to $6.3 billion. A Reversal in market activity would weigh on both lines together.

Three Tests for the Deal Cycle's Durability

Readers can monitor third-quarter results for three signals: whether advisory fees keep growing as announced deals complete, whether Goldman's backlog continues to rise, and whether sponsor-backed IPOs broaden beyond the Americas, as Morgan Stanley's management suggested. At Morgan Stanley, net new assets show whether deal-driven wealth creation is feeding the wealth business.