Wall Street is making the case that the the worst is over for Wall Street. So far investors agree.

Top bank executives spent much of this past week pointing to "green shoots" in dealmaking or trading despite in most cases logging another disappointing quarter.

Morgan Stanley (MS) CFO Sharon Yeshaya said that "sentiment and activity improved towards the end of the quarter, evidenced by green shoots that emerged across our businesses."

Citigroup (C) CFO Mark Mason said "we are seeing green shoots" in the issuance of debt "as clients start to have a greater conviction" about the direction of interest rates.

Goldman Sachs (GS) CEO David Solomon said Wednesday that the month of June "was certainly better" than the earlier part of the quarter and that he has noticed more "risk-on sentiment" in July.

"It definitely feels better over the course of the last six to eight weeks than it felt earlier in the year."

That's certainly what investors wanted to hear. Stocks of most big banks rose this past week. Morgan Stanley's stock was up more than 6% on Tuesday after its results were released. Goldman's stock even rose more than 1% Wednesday despite reporting that profits fell by 58%, more than expected.

Yet the performance of Wall Street's core businesses were certainly nothing to celebrate across most banks. Trading revenue fell by 22% at Morgan Stanley, 14% at Goldman, 13% at Citigroup, and 10% at JPMorgan Chase. Only Bank of America (BAC) had trading revenue rise, by 7%.

The drops were not as much as analysts expected at all but one firm, Morgan Stanley.

Investment banking revenues were down by 24% at Citi, 20% at Goldman, and 6% at JPMorgan. They were flat at Morgan Stanley and up 1.6% at Bank of America.

The drops at Goldman and Citigroup were worse than expected. For the others, the results beat estimates.

'We feel good about where we are'

The global slowdown in dealmaking began last year after a boom in 2021, causing firms across Wall Street to slash bonuses and staff. It continued in 2023 as worldwide investment banking revenues for the second quarter fell 52% from a year ago, according to Dealogic.

Goldman, Morgan Stanley, and Citigroup were among the firms on Wall Street that have made or announced cuts of roughly 20,000 jobs since the end of 2022, resulting in hundreds of millions in severance costs.

Goldman spent $260 million through the first half of the year and Citigroup spent $450 million. Morgan Stanley's severance costs were $308 million in the second quarter.

Some executives hinted this week that the headcount reductions were likely over.

"I'm glad we were early in January to work on head count sizing," Solomon said, referring to a decision that month to lay off more than 3,000 workers. But now, "we feel good about where we are."

'We will see'

Solomon said he is noticing activity picking up in a few spots, citing equity capital markets and mergers and acquisitions.

"When I go back and I look historically at other periods where the macro environment has created sharp drops in investment banking activity, they tend to last for a year or so and then they start to improve," the CEO said. "And so I think we're starting to see that here. It definitely feels better."

Goldman, he added, doesn't have to go back to the boom period of 2021 to see "material uplift."

At Morgan Stanley, Yeshaya said the firm's backlog of deals is on the rise and M&A activity is picking up in energy and financials.

Mason, at Citigoup, cited a "healthy" M&A pipeline "which we would expect to unlock as the sentiment continues to improve." Still the company has "more work to do" on equity capital markets and M&A.

His boss, CEO Jane Fraser, also sounded a cautious note. In a release she said that "the long-awaited rebound in investment banking has yet to materialize."

Then she told analysts "corporates are pretty cautious," citing the prospect of another Federal Reserve interest rate hike, tensions with China, and concerns about limited economic growth.

"I think clients have been trying to understand and get their arms around both the macro and the market outlook for a while," she added. "I think they now seem to accept the current environment is the new normal and are beginning to position themselves globally."

JPMorgan CFO Jeremy Barnum said investment banking was better than expected in June, but cautioned analysts on Friday that it was "too early" to label it a trend.

"We will see," he said. For overall capital markets "July should be a good indicator for the remainder of the year."

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