Wall Street’s Big Banks Power Into Earnings Season on a High

​Profits Set to Climb
Wall Street’s biggest names are entering third-quarter earnings season riding a wave of optimism. Analysts expect profits across the six major U.S. banks to rise about 6% from a year earlier — a solid rebound after months of market volatility and tariff jitters.

“It’s been a good environment,” said Jason Goldberg, an analyst at Barclays, noting that the mix of high market activity and lighter regulations has created a sweet spot for big lenders. JPMorgan Chase, Citigroup, Goldman Sachs, and Wells Fargo kick off earnings this week, followed by Bank of America and Morgan Stanley.

Markets at Record Highs Boost Bank Revenues
The banks’ core businesses — lending, trading, and dealmaking — are firing on all cylinders. With markets hovering near record highs, geopolitical shifts driving volatility, and currencies on the move, trading desks are buzzing with activity.

Except for Wells Fargo, whose Wall Street arm remains smaller, most of the big six are expected to notch a seventh straight quarter of gains in investment banking and trading revenue. “Everything from interest rates to global politics has kept these firms busy,” Goldberg added.

Stock Performance Outpaces the Market
Bank stocks have been quietly outperforming. Shares of Citigroup, Goldman Sachs, JPMorgan, and Morgan Stanley have gained between 23% and 40% this year, beating the S&P 500 by at least nine points. Wells Fargo and Bank of America, meanwhile, have roughly tracked the index.

A key driver has been the recovery in fee-based businesses and the easing of capital and supervisory rules out of Washington — a tailwind that’s fueled investor confidence in the sector.

Deal Activity and Lending Rebound
Just three months ago, many banks were still grappling with the fallout from Trump’s spring tariffs, which froze deals and slowed corporate borrowing. But by early fall, the landscape had flipped.

Global mergers and acquisitions have surged past $1 trillion, while IPOs and corporate debt issuance are climbing again. “We’ve got a lot of rich dialogue with clients around the globe as they think about managing tariff-related risks,” said Mark Mason, Citigroup’s CFO. Capital One CEO Richard Fairbank struck a similar tone, saying, “The consumer remains an anchor of strength in the economy.”

Rising Costs, but for the Right Reasons
Even as banks brace for higher expenses, executives aren’t worried. Rising compensation and bonus payouts reflect a revival in dealmaking and trading. “We call them good expenses,” said Doug Petno, co-head of JPMorgan’s commercial and investment banking division.

A Cautious Note From the Top
Despite the upbeat tone, top executives are voicing caution. Jamie Dimon of JPMorgan and David Solomon of Goldman Sachs have both warned that a market correction could arrive within the next two years. “I’m far more worried than others about a serious correction,” Dimon said in a recent interview. Solomon echoed the sentiment, saying he “wouldn’t be surprised” to see a pullback in equities after such a strong run.

Adding to the uncertainty, the U.S. government shutdown looms as a potential risk, threatening to delay key data releases, lending activity, and IPO approvals if it drags on.

Credit Concerns Resurface
For now, credit remains stable, though recent bankruptcies in the auto industry have stirred some unease. The collapses of Tricolor, a Texas auto dealer, and First Brands, an Ohio-based parts supplier, have prompted questions about the health of high-yield lending.

Major lenders including Fifth Third Bank and JPMorgan have exposure to these firms, while Jefferies, UBS, and First Citizens BancShares have also been named as creditors. Jefferies, which holds about $715 million in receivables tied to First Brands, has seen its stock fall 20% since the news broke.

Still, analysts insist the situation is contained. “Loans to non-bank financial firms are what people in Washington are watching,” said Chris Whalen of Whalen Global Advisors. “So far, credit is okay.”

The Bottom Line
As earnings season kicks off, Wall Street’s banking giants look set to prove their resilience once again. Profits are up, dealmaking is back, and regulation is loosening — but storm clouds linger in the form of market correction fears and potential credit shocks.

​For now, though, the Street is still smiling.