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By Niket Nishant and Manya Saini
(Reuters) -Oppenheimer said on Wednesday it no longer expects growth in U.S. investment banking revenue this year and slashed its earlier estimate of a 32% jump due to uncertainty stemming from tariffs.
The U.S. brokerage downgraded Goldman Sachs, Jefferies and Carlyle, citing a threat to dealmaking.
The move highlights growing concerns among Wall Street analysts, who had been optimistic about a rebound in M&A activity following President Donald Trump's return to the White House, but are now rattled by a trade war.
The current market situation has forced companies to rethink their M&A plans, despite having capital to invest and stabilized interest rates, Oppenheimer said.
This will hit investment banks, which generate billions in earnings from M&A advisory fees from structuring, negotiating and executing deals.
A strong dealmaking environment is also crucial for investment firms to monetize assets and redeploy capital.
"We fear that the current uncertainty over tariffs, a fiscal 'detox' and the general upheaval of 80 years of trade and security arrangements is likely to cause a pause in M&A activity," said Oppenheimer analyst Chris Kotowski, who holds a four-star estimate accuracy rating on LSEG.
The Trump administration is tearing up global trade norms that have defined the world economic order for several decades, targeting allies such as Canada and the European Union.
JPMorgan Chase CEO Jamie Dimon, who had previously stressed that tariffs implemented for national security reasons outweigh inflation concerns, said this month that companies could be hurt by uncertainty, according to media reports.
Morgan Stanley has also said that market volatility and economic uncertainty, fueled by shifting tariff policies, will likely delay the investment banking rebound.
Jefferies will report results next week, offering an early glimpse into the investment banking sector's performance in 2025.
(Reporting by Manya Saini and Niket Nishant in Bengaluru; Editing by Shinjini Ganguli)
