Overview
- JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo report Q3 earnings on October 13, followed by Bank of America and Morgan Stanley on October 14, after a highly profitable first half of 2026.
- Five major Wall Street banks have lost approximately $270 bn in combined market value from their summer peaks, while institutional investors expecting banking stocks to outperform have fallen to 35%.
- Major US banks are expected to generate nearly $19 bn in third-quarter equities trading revenue, although higher Treasury yields and weaker fixed-income activity are raising concerns about future profitability.
Wall Street’s largest banks are preparing to report third-quarter 2026 earnings after one of their most profitable first halves in at least a decade. The sharp increase in US Treasury yields has since raised questions about whether strong trading, investment banking and lending activity can continue supporting earnings growth.
JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo will release results on October 13. Bank of America and Morgan Stanley follow on October 14. The reports will provide the first detailed assessment of how the recent bond market selloff is affecting major US financial institutions.
Analysts expect profits at the five largest Wall Street banks to decline from the second quarter, when elevated trading activity, corporate transactions and financing revenue supported exceptionally strong results, according to estimates compiled by Bloomberg.
Year-over-year comparisons are expected to remain positive for most of the group, with Bank of America and Morgan Stanley forecast to be exceptions.
The outlook contrasts with the first six months of 2026, when investment banks benefited from strong equities trading, active fixed-income markets and substantial corporate financing demand.
Investors are increasingly concerned that higher borrowing costs could weaken those businesses before the year ends.
“Right now, you look out the window, and it feels okay. I think this is more about the risks than what’s happening out the window,” said Brendan Coughlin, president of Citizens Financial Group, which is scheduled to report later in the week.
Wall Street banks lose $270 bn as Treasury yields surge
The deterioration in investor sentiment is already reflected in banking stocks.
JPMorgan Chase, Goldman Sachs, Citigroup, Bank of America and Morgan Stanley collectively lost approximately $270 bn in market capitalization between their respective summer peaks and the October 9 market close.
The losses occurred despite the S&P 500 gaining roughly 14% since the beginning of 2026.
The broader banking sector has also weakened. The KBW Bank Index declined approximately 13% from its August peak and lost 6% during the third quarter, according to Reuters.
A great deal of the recent underperformance for banks has been driven by the dramatic rise in long-term rates
UBS analyst Erika Najarian
Institutional investor expectations have shifted accordingly. An October survey by Truist Securities found that only 35% of institutional investors expect banking shares to outperform the broader equity market. That compares with 68% in July and 82% in December.
The decline in confidence indicates growing uncertainty about banks’ ability to maintain earnings momentum as financing conditions tighten.
Higher interest rates have mixed consequences for bank profitability. They can increase yields on newly originated loans and support net interest income, particularly when deposit costs adjust more slowly.
Rising rates can also increase the cost of deposits and wholesale funding, reduce the market value of fixed-income securities held by banks and discourage corporate borrowing.
Rapid changes in bond yields introduce additional risks because financial institutions and their clients have less time to adjust portfolios, financing arrangements and investment decisions.
Macquarie strategists recently noted that several major financial disruptions over the past 50 years followed abrupt movements in long-term bond yields.
Banks expect nearly $19 bn in equities trading revenue
Despite the pressure on bank shares, equities trading remains a significant source of earnings.
Wall Street’s five largest banks are projected to generate nearly $19 bn in combined stock-trading revenue during the third quarter, according to Bloomberg estimates published October 9.
Goldman Sachs is expected to lead the group with approximately $5.1 bn in equities trading revenue, followed by Morgan Stanley at $4.9 bn.
The estimates suggest that activity remains substantial, even as performance begins to diverge across institutions.
The change is particularly evident in fixed-income markets. Bank executives warned during September that trading activity was moderating from the unusually strong conditions earlier in the year. Fixed-income, currencies and commodities businesses have shown greater signs of slowing than equities desks.
The expected divergence represents a change from the first half of 2026, when almost all major investment banks benefited from simultaneous strength in stock trading and fixed-income activity.
Across the five largest US banks, combined markets revenue is projected at approximately $38.9 bn for the third quarter, according to estimates reported by Financial News. That would represent 17% annual growth, compared with approximately 30% in the second quarter.
Goldman Sachs Chief Executive David Solomon has already indicated that third-quarter performance will be more subdued, with weaker fixed-income, currencies and commodities activity offsetting relatively strong equities trading.
Investment banking and dealmaking face higher borrowing costs
Rising yields are also complicating the outlook for mergers, acquisitions, initial public offerings and corporate financing.
Higher debt financing costs can affect transaction valuations and make acquisitions less attractive, particularly when companies depend on borrowing to complete deals.
The increase in Treasury yields has already contributed to delays in planned stock market listings.
- Bank of America has warned that its third-quarter investment banking fees could decline by at least 10%. Chief Executive Brian Moynihan also indicated that sales and trading revenue would remain broadly flat.
- JPMorgan has offered a more positive assessment, expecting investment banking fees and trading revenue to increase by percentages in the mid-to-high teens.
- Morgan Stanley has reported continued strength in its investment banking pipeline, with corporate investment in artificial intelligence providing a source of potential transaction activity.
The differences suggest that bank earnings will increasingly depend on business mix, client activity and individual transaction pipelines rather than uniformly favorable capital market conditions.
What investors will watch in Q3 bank earnings
Beyond reported profits and trading revenue, investors will focus on management guidance for the final quarter of 2026 and the sustainability of the first-half earnings expansion.
Loan growth, deposit pricing and credit quality will be important indicators of how higher interest rates are affecting traditional banking operations.
Analysts will also examine whether banks face larger funding expenses or pressure on securities portfolios as long-term yields remain elevated.
The financial system’s experience during the 2023 regional banking crisis remains relevant, although some analysts believe major lenders are better positioned today after reducing the duration of securities portfolios and improving interest-rate risk management.
For investment banks, the outlook for capital markets activity may carry even greater importance than third-quarter profits.
Equities trading revenue approaching $19 bn would represent another substantial quarterly result. The more consequential question is whether weaker fixed-income trading, more expensive corporate financing and slower deal execution will reduce earnings opportunities in the months ahead.
With third-quarter reports beginning October 13, investors will be looking for evidence that Wall Street’s exceptionally profitable first half can withstand the sharp rise in borrowing costs.
