Wall Street's largest U.S. banks are expected to report another strong quarter of trading revenue as market volatility continues to encourage more client activity. JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs NYSE:GS, and Morgan Stanley, five of the biggest U.S. banking firms, are projected to generate nearly $39 billion in combined second-quarter trading revenue. Equity traders across several of these banks could deliver their second-best quarter on record, with revenue expected to finish just below the highs reached during the first quarter. Goldman's equities business may produce more than $5 billion in revenue, potentially setting another quarterly record. Keefe, Bruyette & Woods analysts led by Chris McGratty said banks with greater exposure to Asian equity markets, including Morgan Stanley, could benefit from the market swings recorded during the period. JPMorgan analysts led by Vivek Juneja also noted that bank shares had outperformed since mid-May as concerns surrounding the war eased, spending remained strong, and financial markets advanced.
Investment-banking activity also appears to have regained momentum, potentially providing another important earnings driver for Wall Street firms. By the middle of June, Goldman had advised on more than $1 trillion of mergers and acquisitions during the year, reaching that milestone faster than any bank had previously done. Goldman, Morgan Stanley NYSE:MS, and Bank of America NYSE:BAC also helped SpaceX NASDAQ:SPCX, Elon Musk's company, complete the largest public listing on record, although SpaceX negotiated unusually low fees for the offering. Only days earlier, Goldman helped Alphabet NASDAQ:GOOG, a technology company with a growing position as a supplier of artificial-intelligence chips, raise more than $80 billion to finance its broader AI spending. Morgan Stanley analysts led by Manan Gosalia expect banks to provide positive commentary about their deal pipelines, which may support continued investment-banking strength through the second half of the year and into 2027. However, recent volatility in technology stocks has raised questions about other large initial public offerings, while shares of Morgan Stanley and Goldman fell last month after reports that OpenAI was considering delaying its IPO until next year.
Interest rates could become another major focus as traders increasingly expect the Federal Reserve to keep borrowing costs higher for longer under Chairman Kevin Warsh. Elevated rates may strengthen bank earnings by increasing the interest income generated from loans, but they could also place more pressure on consumers' ability to repay debt and require lenders to reserve additional money for possible credit losses. McGratty said investors may need to consider higher peak margins if a higher-for-longer rate environment becomes the base case for banks. Investors are also expected to examine banks' exposure to private credit after the turmoil that dominated the opening months of the year began to ease, even as some funds continued to face redemption requests. JPMorgan analysts said lending growth to nonbank financial institutions slowed from the previous quarter, creating questions about whether banks are reducing the pace of growth in their private-credit exposure.