Six banks seen reaping US$157 billion on Trump’s return

[NEW JERSEY] The six giants of US banking are expected to post their second-highest annual profit ever – a US$157 billion haul – after riding out US President Donald Trump’s dramatic policy changes.

Corporate dealmaking surged to a near-record, bolstered by his administration’s more business-friendly tone. Trading clients repeatedly repositioned portfolios in response to his abrupt announcements. Advances in artificial intelligence helped many lenders keep a lid on costs.

As bank earnings kick off next week, analysts estimate the industry’s six leaders – JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley – probably boosted their combined annual profit 9 per cent from a year earlier, according to analyst estimates compiled by Bloomberg as at Friday (Jan 9) morning in New York. That would touch the highest level since a wave of dealmaking and pandemic-era fiscal stimulus helped drive a record in 2021.

For shareholders, who sent those companies’ stocks soaring last year, the optimism carried into January. But the ageing rally can also make bank stocks prone to turbulence. In December, JPMorgan warned of higher-than-expected expenses in 2026, sending its shares down 4.7 per cent that day.

“The growth trajectory is pretty positive here,” said Cheryl Pate, senior portfolio manager at Angel Oak Capital Advisors. “The wild card is always, Are you going to take the revenue growth and deploy into investments in technology spend, giving away some of that growth potentially?”

The firms’ four-year streak of net income growth has persisted through Trump’s unpredictable policy changes, which can help banks by prompting their clients to reposition portfolios or businesses, generating fees. However, that can cut both ways for banks: Amid quarterly trading windfalls, lending was muted for much of the first half as borrowers remained on the sidelines, waiting to get a better read on the president’s plans.

“What happened is that businesses have learned to live with the increased uncertainty coming out of Washington,” said Gerard Cassidy, head of US bank equity strategy at RBC Capital Markets. “Companies have learned to manage it better now.”

The long-awaited dealmaking surge finally hit in the second half. Banks won spots advising on some of the biggest transactions, such as JPMorgan and Goldman Sachs’ role on the roughly US$55 billion buyout of Electronic Arts.

Some banks have already telegraphed the boost from deal flow. Citigroup chief financial officer Mark Mason said in December that his bank could see an increase in investment-banking fees in the mid-20 per cent range in the last quarter of 2025.

Altogether, analysts anticipated that five of the biggest banks could generate US$9.9 billion in investment-banking fees in the fourth quarter of 2025, up 12.8 per cent from the same period a year ago.

One bellwether has pointed to a strong period. Jefferies Financial Group, which reported earnings on Wednesday, saw investment-banking revenue surge 20 per cent in the fiscal fourth quarter from US$1.2 billion a year earlier. But because that was for the three months to November, it’s not an exact comparison.

“By the end of the year, a lot of the dust had settled,” Matt Zimmer, global head of investment banking at William Blair, said on Wednesday. “We saw the market started to open up and we saw supply and demand come together.”

As companies moved quickly to announce deals at a pace and scale unseen in years, lenders jumped in to finance them as well. Banks, including JPMorgan, wrote sizable checks last year.

Last year’s stock market boom, the S&P 500 was up about 16 per cent, and volatility in the markets is likely to have boosted the trading businesses at many of the big banks.

Analysts are expecting a nearly 13 per cent jump in trading revenue at JPMorgan, and a 9.3 per cent gain at Bank of America. Goldman is expected to report a 6.3 per cent increase, while analysts are forecasting a 2.7 per cent decline at Citigroup, driven by a drop in fixed-income trading.

Morgan Stanley traders face a tough comparison. Their stock business soared during the fourth quarter of 2024, with revenue jumping 51 per cent that period from a year earlier.

Still, analysts are expecting better results this time around. Fourth-quarter revenue may total US$5.46 billion, according to estimates, up from US$5.26 billion a year earlier.

Interest rates

While the latest earnings will matter, any forward guidance and affirmation of the capital markets rebound will likely be more important, Morgan Stanley analysts, including Betsy Graseck, said.

Forecasts for 2026 could benefit from lower interest rates. US Federal Reserve chair Jerome Powell is set to end his term in May and Trump has campaigned for the central bank to lower rates. Trump may appoint a “likely more” dovish successor to stimulate the economy, TD Cowen analyst Steven Alexopoulos wrote in a note on Wednesday.

Banks typically react quickly to rate cuts by paying less to customers for deposits, which makes funding cheaper for them.

Meanwhile, banks are expected to see some balance-sheet benefits this year. Five-year securities bought in 2021, when interest rates were at record lows, are set to mature. Those were some of the most painful, low-yielding assets that have saddled banks with paper losses, squeezed profitability and led to some regional bank failures. Banks will now be able to offload them painlessly as they mature at par.

“It’s really quite positive,” RBC’s Cassidy said. “Think of all the bonds that they purchased in 2020 and 2021 that will come up to renewal this year. They will be reinvesting that at a much higher yield.” BLOOMBERG