The 4th quarter earnings season for 2025 got off to a strong start as major U.S. banks delivered results that came in well ahead of expectations. Despite lingering economic uncertainty, the industry showed resilience, supported by active deal-making, steady borrowing demand, and robust trading activity. Brendan Browne, Financial Institutions Managing Director at S&P Global Ratings, offered perspective on what drove these results and what lies ahead for the banking sector.
In total, the six largest U.S. banks, Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, generated roughly $583 billion in revenue in 2025. Combined profits reached about $157 billion, an 8% increase that points to a banking sector on solid footing. Goldman Sachs and Morgan Stanley stood out, each posting record annual revenues in investment banking and trading, underscoring how profitable those businesses can be during periods of market volatility.
Browne pointed to trading desks as a key driver behind the strong performance. Elevated volatility and high trading volumes helped fuel gains across both equity and fixed income trading in 2025. While those conditions created an unusually favorable environment, Browne cautioned that it remains difficult to predict whether the same momentum will carry into 2026, particularly if markets stabilize.
Beyond trading, investment banking activity is clearly picking up, with mergers and acquisitions showing renewed strength. Advisory revenues are improving, and loan growth remains healthy. Browne noted that rising net interest income has also become an important support for bank earnings, potentially helping to offset any slowdown in trading-related revenue.
Still, risks remain. Browne highlighted ongoing concerns around leverage, especially as banks underwrite debt and compete more directly with private credit firms. Broader economic pressures tied to inflation and geopolitical uncertainty could also influence performance as the industry moves through 2026.
Technology is another area shaping the outlook. Browne discussed how banks are increasingly investing in artificial intelligence to streamline operations, strengthen risk management, and improve customer engagement. While AI adoption is still in its early stages, institutions are optimistic about its ability to drive efficiencies and unlock new growth opportunities over time.
From a credit perspective, the near-term outlook remains stable. S&P currently has no negative outlooks on the major banks it rates. That said, Browne urged caution around regulatory developments. Proposed changes to capital standards could present challenges, particularly if they limit lending capacity. While equity investors may view regulatory easing favorably, credit analysts tend to take a more cautious stance given the potential impact on balance sheets.
Overall, Browne’s insights highlight a banking sector that entered 2026 from a position of strength, supported by diversified revenue streams and improving investment activity. At the same time, economic uncertainty, regulatory shifts, and evolving technology will continue to shape the path forward. As future earnings seasons unfold, those factors will be key to understanding how sustainable the current momentum proves to be.