JPMorgan, Citi, and Goldman Sachs lead US bank profit rebound amid trading and loan growth signals
Trading strength and a rebound in investment banking are expected to lift second-quarter profits at major US banks, according to Reuters, with analysts predicting low surprises and strong performance across the sector.
JPMorgan Chase, Citigroup, and Wells Fargo are set to report results Tuesday, and as per analyst Stephen Biggar of Argus Research, “Things are looking good and we expect that most banks will beat expectations.”
Canadian financial professionals monitoring international markets may note that, as per Reuters, this expected profitability comes amid macroeconomic uncertainty, geopolitical tensions, and investor attention on US tariff policies.
According to analysts cited by Reuters, most large US banks are projected to post low-to-mid single digit percentage gains in net interest income (NII), while credit quality among consumers and commercial borrowers remains robust.
Though loan demand has been muted, it is beginning to improve, with Wells Fargo analyst Mike Mayo projecting industry loan growth of around 5 percent, up from earlier 3 percent estimates.
Mayo said, “One of the biggest questions is: how sustainable is this loan growth.”
Investment banking revenues are also expected to exceed forecasts.
According to a report by Morgan Stanley analyst Betsy Graseck published last week, management teams are likely to highlight building pipelines.
This marks a reversal from April, when deal activity reached a 20-year low due to the US-China trade conflict and broader geopolitical unease.
Citigroup and Bank of America executives stated last month that market revenue would likely increase by mid-to-high single digit percentages, reported by Reuters.
Analysts at Goldman Sachs added that trading revenues are expected to stay strong given the continued uncertain global outlook.
Loan loss provisions are forecast to remain stable or decline slightly across several banks, with lenders setting aside fewer reserves due to resilient consumer and business financial health.
US President Donald Trump’s deregulatory stance is also a factor. Banks recently passed the Federal Reserve’s stress test and demonstrated sufficient capital buffers to weather adverse scenarios.
According to Reuters, investors are watching how banks will use excess capital after recent dividend hikes and share buyback announcements.
Earnings preview for six major US banks:
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JPMorgan Chase is forecast to post a 5 percent increase in earnings per share (EPS), according to LSEG estimates, with focus on NII, investment banking outlook, and its work on stablecoins.
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Bank of America is projected to report a nearly 4 percent rise in EPS and a 7 percent increase in NII. However, investment banking fees may decline to around US$1.2bn, based on management guidance.
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Citigroup is expected to see a 5 percent EPS boost driven by capital markets performance. Analyst Mike Mayo told Reuters that expenses and provisions may exceed earlier expectations and cited Citi as his top pick.
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Wells Fargo is expected to show reduced operating expenses due to shrinking personnel costs. According to Raymond James analysts, loan balances may increase slightly while provisions remain flat. The bank recently exited a seven-year-long asset cap, prompting attention on its future growth.
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Goldman Sachs is likely to post an EPS gain of nearly 11 percent, with strength in investment banking and trading, as per analyst projections reported by Reuters.
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Morgan Stanley could report over 7 percent EPS growth. In a BofA report, analyst Ebrahim Poonawala said, “After a relatively seamless CEO transition and a recalibration of strategic targets last January, CEO Ted Pick appears well-placed to flex franchise muscle and gain market share.”
In parallel with this earnings optimism, HSBC has withdrawn from the Net-Zero Banking Alliance (NZBA), following exits by several major US banks including JPMorgan, Citi, and Morgan Stanley, as reported by Reuters on Friday.
HSBC stated it continues to support clients’ transition goals but believes the foundational work by NZBA is complete as it updates its own net-zero plan.
A spokesperson said, “We remain resolutely focused on supporting our customers to finance their transition objectives and on making progress towards our net zero by 2050 ambition.”
The NZBA, launched in 2021, was designed to align banks with global warming targets through financing strategies and emissions reductions linked to lending and investment portfolios.
HSBC dropped its 2030 emissions-reduction target in February, citing slow economy-wide progress.
Jeanne Martin, co-director of Corporate Engagement, stated, “We strongly condemn HSBC's decision to leave the NZBA, which is yet another troubling signal around the bank's commitment to addressing the climate crisis.”
As reported by Reuters, HSBC’s Chief Sustainability Officer Julian Wentzel indicated the bank would adopt a “more measured approach” to fossil fuel lending.
The bank's website states that emissions targets will “continue to be informed by the latest scientific evidence and credible industry-specific pathways.”
In the US, banks have faced scrutiny from Republican lawmakers, who accused them of colluding to penalise fossil fuel producers via groups like NZBA. Legal concerns prompted NZBA to amend its rules in April, which members voted on.
A spokesperson for the group said it received strong backing to continue facilitating conditions that support clients' investments in the net-zero transition.
