Morgan Stanley is very happy with its ex-JPMorgan bankers as the new boom begins

If you're an investment banker wondering when things might start looking up, then Morgan Stanley CEO Ted Pick has some good news for you. 

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Speaking on today's investor call, Pick said he's "convicted" that we're "in the early stages of a multiyear investment bank led cycle," and that normalized M&A activity will resume in the next "quarters and years."

Pick's conviction comes after Morgan Stanley reported a 51% increase in investment banking revenues in the second quarter and a doubling of profits in its overall institutional securities business. He added that you can tell things are looking up because convertible issuance has risen dramatically and the number of "bakeoffs," where clients choose a bank to represent them, has tripled compared to last year in some sectors. 

Bakeoffs imply pitches and pitches imply pitchbooks, which are work for junior bankers. However, Pick made no mention of adding extra analyst or associate talent. Instead, he said that Morgan Stanley is happy with all the "very high quality" investment bankers it's hired in the past few years. They're people who, "have spent their career at one firm and decided to come to the Morgan Stanley platform," he said. 

Pick didn't name any names regarding these new hires, but we presume he was referring to the likes of Marco Caggiano, who joined as vice chairman of M&A in July last year after 23 years with JPMorgan, or Andy Lipsky, JPMorgan's vice chair of investment banking, who joined in April 2024, although most of his career was spent at Credit Suisse. Last July, Morgan Stanley also hired Michael Kagan from Citi for structured M&A.

Speaking three months ago at the time of the bank's first quarter call, both Pick and Morgan Stanley CFO Sharon Yeshaya were equally bullish. Both said the bank planned to "opportunistically" add talent. There are some signs that this is occurring in the mid-ranks: in London, Morgan Stanley recently recruited Sabina Virtosu, a vice president (VP) from Evercore; in New York it recently hired Michael DaCosta, a FIG VP from JPMorgan.

Not everyone is convinced by Pick's enthusiasm, however. Banking analyst Mike Mayo pointed out that people have been calling a revival in investment banking revenues for multiple prior quarters. But Pick declared that it's really happening this time and that even if rates remain higher than in the recent past, then "the game will have to go on."  So much activity has been suppressed that deals will have to resume. Financial sponsors have now "come of age," he added: they're no longer a "lone wolf" but work with banks to finance deals and have "global reach and can work the entire capital structure." 

Pick conceded, however, that the new era for dealmaking will be more complicated than its recent predecessors. Corporates are now in a world of real sovereign risk, where the cost of capital varies from one jurisdiction to another. He also intimated that the real revival in dealmaking might not occur until 2025, when the US election is "behind us." 

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