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Wall Street’s bosses are finally seeing signs of a broader pickup in investment banking, but they are not cheering too loudly just yet.

Investment banking divisions showed robust growth in the first quarter for the largest U.S. banks, which reported surging revenues and fees. Capital markets led the comeback, executives said.

“We have strong backlogs and momentum in every part of the firm,” Morgan Stanley’s MS-N new chief executive Ted Pick told analysts on a conference call after his first quarter at the helm. “While the pipelines are healthy, there remains a backdrop of economic and geopolitical uncertainty.”

Morgan Stanley’s investment banking revenues jumped 16 per cent to US$7-billion in its first quarter, it reported on Tuesday, sending shares up more than 3 per cent.

At Bank of America BAC-N, fees from investment banking surged 35 per cent to US$1.6-billion, but its stock fell more than 4 per cent as it set aside more money to cover souring loans.

“We’re just happy to see the investment banking activity improve,” BofA’s finance chief Alastair Borthwick told journalists. He cited efforts to deepen its presence in middle markets and boost collaboration between corporate and commercial bankers.

“It appears that a rising tide has been lifting all capital market boats here,” said David Wagner, portfolio manager at Aptus Capital Advisors, adding that Morgan Stanley’s performance was “excellent.”

The results echoed strong performances at Goldman Sachs GS-N, JPMorgan Chase JPM-N and Citigroup C-N. While executives cited the return of some activity, they were also quick to point out risks, including interest-rate uncertainty, escalating geopolitical conflicts and the U.S. election.

“I’ve said before that the historically depressed levels of activity wouldn’t last forever,” Goldman’s CEO David Solomon told investors on a conference call Monday. “CEOs need to make strategic decisions for their firms, companies of all sizes need to raise capital and financial sponsors need to transact to generate returns for their investors.”

Goldman shares rallied 3 per cent after profits rose 28 per cent, beating analyst expectations.

Equity capital markets have been a bright spot in recent months as several prominent initial public offerings (IPOs) fuelled optimism that more activity would follow.

“We are cautiously optimistic that we could see a measured reopening of the IPO market in the second quarter,” Citigroup CEO Jane Fraser told analysts on Friday.

Citi’s investment banking fees climbed 35 per cent in the first quarter, lifted by debt and equity capital markets. Yet mergers and acquisitions (M&A) were still slow to emerge, Ms. Fraser said.

“Corporate sentiment is quite positive, especially in the U.S., and our clients around the world have very sound balance sheets,” she said. Still, markets were too “benign” in pricing in risk factors such as geopolitical conflicts, she added.

Citi hired JPMorgan’s former co-head of investment banking, Viswas Raghavan, who is tasked with growing its banking revenues when he joins later this year.

At JPMorgan, chief financial officer Jeremy Barnum also struck a cautious note even as investment banking revenue climbed 27 per cent to US$2-billion.

“While it was encouraging to see some positive momentum in announced M&A in the quarter, it remains to be seen whether that will continue,” Mr. Barnum told analysts on a call on Friday. “And the advisory business still faces structural headwinds from the regulatory environment.”

Morgan Stanley’s Mr. Pick is more optimistic than other CEOs on the effect of geopolitical risks, saying in some cases it can even create incentive for international deals if global conflicts affect supply chains.

“We are in the early innings of a multiyear M&A cycle,” said Mr. Pick at Morgan Stanley, who described investment banking and capital markets as being in the early to middle parts of the business cycle. “We should continue to see all kinds of underwriting … I’m feeling good about this.”

Large M&A announcements in multiple industries presented recent signs of rising confidence from CEOs and boards, that would support capital markets, Ms. Fraser said.

Goldman’s Mr. Solomon expects private equity firms, or financial sponsors, to get more involved in deals in an effort to start returning capital to investors.

Ms. Fraser, meanwhile, noted financial sponsors are sitting on US$3-trillion that they need deploy.

Citigroup shares are up nearly 11 per cent so far this year, outpacing peers including JPMorgan and Bank of America, which have gained 6 per cent and 3 per cent, respectively. Goldman shares have risen 3 per cent, contrasting with a 3-per-cent decline for Morgan Stanley. The S&P 500 banks index has climbed 6 per cent.

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