The largest U.S. investment banks hit $4.6 billion in revenue as the stock-buy freeze caused by recent market volatility, a sharp slowdown for Wall Street, which saw record profits from stock sales last year.

Morgan Stanley, JPMorgan Chase, Bank of America, Goldman Sachs and Citigroup have generated a cumulative $645 million in equity market (ECM) fees so far this year, according to data provider Dealogic, compared to $5.3 billion in the same period in 2021. Industry-wide ECM fees are down more than 75 percent year over year to $2.7 billion.

The feast to famine underscores the unpredictable nature of investment banking, a crucial reason why major investors discount these stocks for more predictable sectors, often to the frustration of bank executives.

According to data from Dealogic, there was not a single traditional IPO in the U.S. between February 17 and March 14, the longest drought outside a holiday season since 2017. A small business broke its streak with a $16 million listing on Tuesday, but bankers expect it to will take some time for bigger deals to return.

Volumes from follow-up stock sales and convertible bond issuance have also slowed dramatically, and the dry spell is expected to lead to a sharp decline in first-quarter earnings at banks that benefited from a deluge of deals early last year.

Column chart of ECM fees per bank ($m) over the past year with Feast-fo-famine: Investment bank fees hit by capital increase freeze

“The right advice [to companies] is to prepare and be nimble because windows can open and close in a much shorter time span than we’ve been used to in the past 12 to 18 months,” said Daniel Burton-Morgan, head of the Americas syndicate for ECM at Bank of America.

Bankers were prepared for a slowdown in activity after a record-breaking 2021, not least because the first three months of last year were notable for the boom in special acquisition IPOs, which has slowed dramatically since then.

Many nevertheless started the year optimistic about a strong pipeline of potential IPO candidates such as Reddit, Instacart and Stripe.

However, rising interest rate expectations, market volatility caused by the war in Ukraine and the horrendous post-flot performance of many of last year’s most prominent stock exchanges, such as Rivian, have brought most activity to a halt.

“People probably thought it was going to drop 30 to 50 percent, but I don’t think anyone had cut 75 percent,” said Chris Kotowski, a banking analyst at Oppenheimer & Co.

Only one company — private equity firm TPG — has raised more than $250 million in an IPO this year, compared to 43 in the first 13 weeks of last year, not counting Spacs. The nine-week gap since that deal is the longest without a $250 million IPO since 2016.

Several senior bankers stressed that there was a significant backlog of companies looking to raise capital, but said stock markets would need to calm down for an extended period of time before activity could recover, especially for IPOs that require a longer marketing period.

“We need more stability in the market for investors to feel comfortable,” said a senior ECM director. “If We Were So Happy” [as] to get positive news from Ukraine, people are ready to come to the market, but nobody has a crystal ball to know when that is going to happen.”

The downturn has caused US and European banks to slip in the global ECM rankings. According to data from Refinitiv, Chinese banks are responsible for six of the top 10 ECM bookrunners this year by revenue, compared to just one at the same point last year.

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