The six giant banks are expected to investigate American banking sector Its second-highest annual profit ever, at $157 billion, after surpassing the radical policy changes of US President Donald Trump.
Corporate deals have seen an almost record high, fueled by his administration’s more pro-business orientation, trading clients have repeatedly restructured their portfolios in response to his surprise announcements, and advances in artificial intelligence have helped many lenders control costs.
With bank earnings due to be announced next week, analysts estimate that the sector’s six leading banks – JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley – have raised their annual earnings combined by 9% compared to last year, according to analyst estimates compiled by Bloomberg. This will reach the highest level since the wave of deals and fiscal stimulus that followed the pandemic, which contributed to a record 2021.
For shareholders, who contributed to the rise in the shares of these companies last year, optimism continued until January, but this gradual rise may make bank stocks vulnerable to fluctuations. In December, JP Morgan warned of higher-than-expected expenses in 2026, which led to its shares falling by 4.7% on that day.
Analysts said that the growth trajectory is very positive here but the question remains: Will the revenue growth be invested in technology spending, which may lead to part of this growth being given away?
The net income of these companies has continued to grow over four years despite the unexpected political changes brought about by Trump, which may benefit banks by urging their clients to restructure their portfolios or businesses, which generates fees for them. However, this may have two sides to the banks. In the midst of unexpected gains from quarterly trading, lending was weak during most of the first half of the year, as borrowers preferred to wait, waiting for a clearer understanding of the president’s plans.
“What has happened is that companies have learned to live with the increased uncertainty coming out of Washington,” said Gerard Cassidy, head of US bank equity strategy at RBC Capital Markets. “Companies have now learned how to manage it better.”
Finally, the much-anticipated surge in deal making materialized in the second half of the year, with banks getting opportunities to advise on some of the largest deals, such as JPMorgan and Goldman Sachs’ role in the approximately $55 billion acquisition of Electronic Arts.
Some banks have already pointed to this rebound in deal flow. Mark Mason, Citigroup’s chief financial officer, said in December that his bank could see investment banking fees increase by 20% to 30% in the fourth quarter of 2025.
Analysts expect the five largest banks to collectively generate $9.9 billion in investment banking fees in the fourth quarter of 2025, an increase of 12.8% compared to the same period last year.
One of the most prominent indicators pointed to a period of prosperity. Jefferies Financial Group, which announced its earnings last Wednesday, saw investment banking revenues rise by 20% in the fourth quarter of the fiscal year, compared to US$1.2 billion in the same period last year. But since these numbers cover the three months ending in November, the comparison is not entirely accurate.
As companies rushed to announce deals at a pace and scale not seen in years, lenders rushed to finance them as well. Banks, including JPMorgan, issued huge checks last year.
The stock market witnessed a notable boom last year, with the Standard & Poor’s 500 index rising by about 16%, and market volatility is likely to have boosted the trading business of many major banks.
Analysts expect a jump in trading revenues at JPMorgan by approximately 13%, gains of 9.3% at Bank of America, and Goldman Sachs is expected to announce an increase of 6.3%, while analysts expect a decline of 2.7% at Citigroup, driven by a decline in trading in fixed income instruments.
Morgan Stanley traders face a difficult comparison, as their equity business boomed during the fourth quarter of 2024, with revenues jumping 51% during that period compared to the previous year.
However, analysts are expecting better results this time around, and estimates suggest that fourth-quarter revenue could reach US$5.46 billion, up from US$5.26 billion a year earlier.
Interest rates
Although the latest earnings results are important, any future guidance and confirmation of a recovery in capital markets will likely be even more important, according to Morgan Stanley analysts, including Betsy Grassick.
The outlook for 2026 may benefit from lower interest rates. US Federal Reserve Chairman Jerome Powell’s term is set to end in May, and Trump has called on the central bank to lower interest rates.
Banks usually respond quickly to interest rate cuts by reducing customer payments on deposits, making it cheaper for them to finance.
At the same time, banks are expected to see some interest on their balance sheets this year, as five-year bonds purchased are set to mature in 2021, when interest rates were at all-time lows and such bonds were among the most painful, lowest-yielding assets that have saddled banks with book losses, dented profitability, and led to the bankruptcy of some regional banks. Banks will now be able to sell these bonds quite easily at maturity at face value.
Bankers said this is a very positive thing. Imagine the amount of bonds they bought in 2020 and 2021, which will be renewed this year. “They will reinvest it with a much higher return.”
