U.S. big banks set to report stronger second-quarter revenue

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U.S. big banks set to report Q2 revenue

Highlights

Major U.S. banks, including JPMorgan Chase and Goldman Sachs, are expected to report robust Q2 results driven by surging capital markets activity and record trading revenue.
KBW estimates investment banking revenue to rise 26% and trading revenue to increase 14% year-over-year, boosted by high-profile IPOs like SpaceX and geopolitical volatility.
Improved commercial lending, resilient consumer banking, and focus on deposit competition and sustainability are key investor watchpoints as management’s outlook becomes central this quarter.

Revenue drivers ahead of earnings releases

As reported by CNBC, major U.S. banks are expected to post robust second-quarter results starting Tuesday, with JPMorgan Chase, Bank of America, Citigroup, Wells Fargo and Goldman Sachs scheduled to report first, followed by Morgan Stanley on Wednesday. Analysts expect equities and fixed-income trading revenue to approach, and possibly surpass, records set earlier this year as market volatility and corporate activity support fee income.

Wells Fargo analyst Mike Mayo describes the current environment as a "sweet spot" for the sector because both Wall Street and traditional lending businesses are expanding at the same time. He says banks are benefiting from a surge in capital-markets activity, highlighted by last month's SpaceX IPO, as well as strong trading conditions linked to the Iran war and broader geopolitical unrest.

According to KBW analyst Chris McGratty, investment banking revenue for the group could rise 26% from a year earlier, while trading revenue could increase 14%. Banks involved in the SpaceX listing, led by Goldman Sachs and Morgan Stanley, are also positioned to collect additional fees from debt raising and potential wealth management mandates tied to newly created fortunes.

Jay Ritter, professor emeritus of finance at the University of Florida's Warrington College of Business, says firms may also benefit from so-called soft dollars tied to heavily oversubscribed IPO allocations. He says those payments from hedge funds and some active mutual funds can be more lucrative for investment banks than the formal underwriting fee itself.

Momentum and risks for the banking sector

Mayo argues that an equally important shift this quarter may be taking place outside investment banking and trading desks. Commercial lending, which has been weak for years, appears to be improving as banks try to reclaim market share from private credit providers and as artificial intelligence-related capital spending spreads more broadly through the economy.

He says companies are resuming investment despite uncertainty, treating disruption as a normal condition while moving ahead with factory construction and plant spending. That trend could especially help regional lenders such as Fifth Third, where commercial lending makes up a larger share of business than it does at more diversified giants like JPMorgan Chase.

Consumer banking also remains relatively healthy, with low unemployment helping borrowers stay current on mortgages, auto loans and credit cards. At the same time, analysts are watching for pressure points including possible problems in private credit and intensifying competition for deposits, which could force some banks to offer higher rates and squeeze margins if interest rates stay firm or move higher.

After two years of outperformance by financial stocks, investors are focusing less on whether the latest quarter is strong and more on whether current conditions can last. That makes management commentary on sustainability central to this reporting cycle, especially as the sector also benefits from the Trump administration's push to ease banking regulations.

Our earlier coverage of U.S. banks’ second-quarter fee growth focused on forecasts for a sharp rebound in investment banking revenues at major Wall Street firms. We noted that the upswing was expected to be led by equity capital markets activity—highlighted by SpaceX’s record-fee IPO—alongside a renewed flow of large M&A deals and supportive trading conditions despite geopolitical volatility.

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