Investors are preparing to scrutinize third-quarter earnings from the largest U.S. banks next week, with higher interest rates, lending growth, funding costs and the outlook for investment banking deals expected to dominate attention.
Although analysts expect profits at the biggest lenders to increase by as much as 20% from a year earlier, rising Treasury yields have put pressure on bank shares and raised questions about whether higher borrowing costs could eventually weaken lending and deal activity.
Major Banks Set to Report
Four of the six largest U.S. banks — JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo — are scheduled to release third-quarter results on October 13.
Bank of America and Morgan Stanley will report on October 14.
According to LSEG estimates compiled on October 7, analysts expect third-quarter earnings per share of:
• JPMorgan: $5.94, compared with $5.07 a year earlier
• Bank of America: $1.10, compared with $1.06
• Citigroup: $2.41, compared with $2.24
• Wells Fargo: $1.85, compared with $1.66
• Goldman Sachs: $12.44, compared with $12.25
• Morgan Stanley: $2.94, compared with $2.80
Higher Rates Become a Key Concern
A recent rise in Treasury yields has become one of the biggest issues for bank investors.
Higher rates can benefit banks in some circumstances by supporting interest income, but they can also increase the cost of deposits and borrowing while making companies and consumers less willing to take on new loans.
The KBW Bank Index has fallen about 13% from its August peak and was down roughly 6% for the third quarter, despite expectations for stronger bank earnings.
Investors will therefore be looking for signs that loan growth remains healthy and that banks are not having to significantly increase the rates they pay depositors to retain customers.
Analysts also want reassurance that credit quality remains stable.
Investment Banking Deals in Focus
Another major issue will be whether higher borrowing costs are beginning to damage the recovery in mergers, acquisitions and initial public offerings.
Rising bond yields contributed to the postponement of several IPOs in late September, including offerings involving smart-ring maker Oura and AI data-centre developer SB Energy.
That has created a divergence among the major banks.
JPMorgan expects investment banking fees and trading revenue to increase by a mid-to-high-teens percentage.
By contrast, Bank of America expects investment banking fees to fall by at least 10% in the third quarter, while sales and trading revenue is expected to be roughly flat.
Morgan Stanley has maintained a more positive view of its pipeline, saying companies remain in the middle of an AI investment cycle and that its investment banking pipeline is robust.
Trading Revenue May Still Rise
Trading is expected to remain an important contributor to bank earnings, although growth may be slower than in the previous quarter.
The five largest U.S. banks are expected to generate around $38.9 billion in combined markets revenue for the third quarter, according to analyst estimates compiled by FactSet. That would represent a 17% increase from the same period last year but a slowdown from the 30% year-on-year growth recorded in the second quarter.
Goldman Sachs has warned that its fixed-income, currencies and commodities business could be weaker than in the previous quarter, although equities trading performed strongly.
Investors Will Also Watch Loan Growth
Loan growth will provide another important indication of how the U.S. economy is holding up.
Wells Fargo expects its 2026 loan growth to outperform its earlier forecast and has pointed to healthy consumer spending and credit trends.
At the same time, investors will want to know whether higher rates are beginning to discourage businesses and households from borrowing.
Despite those concerns, analysts do not currently expect a repeat of the large unrealized securities losses that contributed to the 2023 banking crisis. Banks have generally reduced the duration of their securities portfolios and improved their management of interest-rate risk since then.
What Investors Are Looking For
The upcoming earnings reports could therefore provide an important test of whether U.S. banks can maintain strong profitability while interest rates remain elevated.
Investors will focus particularly on:
• Loan growth and demand for credit
• Deposit costs and competition for customer funds
• Credit quality and potential losses
• Investment banking pipelines
• M&A and IPO activity
• Trading revenue
• Fourth-quarter earnings guidance
For banks with large retail operations, a cooling investment-banking environment could also make diversified lenders more attractive than institutions that depend more heavily on capital-markets activity.
The results from JPMorgan, Goldman Sachs, Bank of America, Citigroup, Wells Fargo and Morgan Stanley could therefore offer investors a clearer picture of how higher rates are affecting both Wall Street dealmaking and Main Street borrowing.
