Wall Street’s largest banks have closed out 2025 on a high note, delivering record revenues and rising profits as a rebound in dealmaking, buoyant trading activity, and resilient lending helped defy earlier fears of a slowdown.
The fourth-quarter earnings season, led by results from Goldman Sachs and Morgan Stanley, underscored a renewed sense of confidence across the industry.
Strong pipelines for initial public offerings, mergers and acquisitions, and private-equity transactions have reinforced expectations that investment banking momentum will carry into 2026.
That optimism persists even as the sector faces political and policy uncertainty, including renewed scrutiny from US President Donald Trump, whose proposal to cap credit card interest rates has unsettled lenders.
Goldman Sachs and Morgan Stanley both reported higher quarterly profits, supported by a flurry of dealmaking and robust trading activity.
Goldman’s shares rose 5.1% after the results, while Morgan Stanley gained 6%, reflecting investor confidence that capital markets activity is regaining traction.
Apart from expected one-off charges at JPMorgan Chase and Citigroup, profits rose broadly across the sector.
Taken together, the six largest US banks — JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley — generated roughly $593 billion in revenue in 2025, a 6% increase from the prior year and the highest on record.
Combined profits reached about $157 billion, up 8% year on year and only slightly below the pandemic-era peak of 2021, which was inflated by accounting gains linked to loan-loss reserves.
Trading desks steal the spotlight
Much of the earnings strength this quarter was driven by trading floors, which benefited from sharp swings in markets during the year.
Client activity surged after tariff announcements in April rattled equities, followed by a strong recovery that pushed the S&P 500 and Dow Jones Industrial Average to record highs.
Goldman Sachs retained its position as the top player in equities trading, generating $16.5 billion in revenue, up 23% from the previous year.
Morgan Stanley and JPMorgan recorded even faster growth, with equities trading revenue rising 28% and 33%, respectively.
Banks said hedge funds and other sophisticated investors were particularly active, often borrowing more aggressively to amplify their bets.
“Equity trading revenues have been the story of the earnings so far,” said Brian Mulberry, senior client portfolio manager at Zacks Investment Management.
He pointed to increased use of leverage and options as key drivers of growth.
At Goldman, the effects of strong trading reverberated across the firm.
Lending tied to trading activity boosted revenues in investment banking, wealth management, and adjacent businesses.
The bank has been expanding its lending operations to smooth out the swings that come with volatile trading and dealmaking cycles.
Goldman reported record revenue from equities financing, which includes lending to hedge funds, as well as strong growth in fixed-income, currencies, and commodities financing.
These businesses involve a wide range of loans, from capital call facilities for investment firms to warehouse financing for mortgage lenders.
Volatility likely to persist
Market volatility, which proved so lucrative for trading desks in 2025, is widely expected to persist into 2026.
Investors remain wary of stretched equity valuations, concerns about a bubble in artificial intelligence stocks, and uncertainty over the Federal Reserve’s next moves.
“In periods of heightened policy volatility, you tend to see more knee-jerk trading,” said David Wagner, head of equities at Aptus Capital Advisors.
He added that midterm election years historically see above-average market drawdowns, increasing the likelihood of further trading surges.
For banks, that volatility is a double-edged sword: it supports trading revenue but can also dampen risk appetite if markets turn sharply lower.
Dealmaking revival gathers pace
Beyond trading, a revival in mergers and acquisitions is underpinning optimism across Wall Street.
Rising deal activity is also fuelling demand for loans that help finance acquisitions, infrastructure projects, and corporate investment, particularly in sectors tied to artificial intelligence.
Industrywide debt underwriting activity surpassed its previous peak in 2020, according to Dealogic, while loans used to fund acquisitions hit new highs, supported by several megadeals.
Those trends are translating into higher investment banking fees and renewed confidence among dealmakers.
Goldman Sachs chief executive David Solomon said internal forecasts suggest M&A volumes this year could approach the 2021 record, with a bullish scenario implying a new high.
“We are seeing an accelerating pipeline in M&A and IPOs,” Morgan Stanley chief financial officer Sharon Yeshaya said in an interview with Reuters, highlighting healthcare and industrials as particularly active sectors.
The list of companies reportedly considering IPOs in 2026 continues to grow and includes high-profile names such as OpenAI, SpaceX, and AI chipmaker Cerebras.
“I expect 2026 to be a very strong year of IPO issuance and announced M&A,” said Macrae Sykes, a portfolio manager at Gabelli Funds.
He cited healthy economic growth, deregulation, and the lagged effects of Federal Reserve rate cuts in 2025 as key tailwinds.
Notably, the resurgence in dealmaking defied expectations that activity would stall after Trump announced sweeping tariffs on major global economies last spring, which initially unsettled markets.
“We entered 2026 with our deal pipeline meaningfully greater than at any point in the last five years,” Wells Fargo chief executive Charlie Scharf told analysts, while cautioning that market conditions can change quickly.
Lending growth defies slowdown fears
Perhaps the most striking feature of the banks’ 2025 performance was the surge in lending.
The four largest US lenders expanded their loan books by $385 billion, nearly a 10% increase and the biggest annual jump in years.
That growth came despite widespread concerns about a slowing economy and intensifying competition from private credit firms.
Results from Bank of America, Citigroup, and Wells Fargo, alongside JPMorgan’s earlier report, showed stronger-than-expected loan growth in the fourth quarter.
Yet the lending story is not one of booming consumer demand.
At Bank of America, lending to households through mortgages, credit cards, and auto loans rose just 2% last year, while corporate lending increased 3%.
The real surge came from the banks’ trading desks, which lend to specialty finance firms, private equity funds, and private credit investors.
Lending in that area jumped 30%, reflecting the growing role of banks in funding complex financial structures.
Rising leverage raises questions
While these loans support economic activity, particularly for mid-sized companies backed by private credit, they also add layers of leverage to the financial system.
Structures such as continuation funds, dividend recapitalisations, and special-purpose vehicles have become more common, raising concerns about hidden risks.
Recent collapses at companies such as First Brands and Tricolor have highlighted potential vulnerabilities, delivering losses to banks, including JPMorgan.
Dimon has acknowledged the murkiness of the picture.
While he insists JPMorgan’s lending to alternative financiers is prudent, he has also described it as a form of regulatory arbitrage.
On a recent call, JPMorgan for the first time disclosed its own estimate of exposure to non-bank financial institutions, which rose from $50 billion in 2018 to $160 billion last year.
Dimon urged regulators to consider whether the system is better served by this structure.
Credit card cap stirs industry unease
Still, not all policy signals are being welcomed by Wall Street.
Trump’s proposal to cap credit card interest rates at 10% for one year has drawn sharp pushback from bank executives, who warn it could restrict credit availability and weigh on economic activity.
Credit cards are among banks’ most profitable products, reflecting the unsecured nature of the debt and the higher interest rates charged to compensate for risk.
Bank of America chief executive Brian Moynihan said the debate around the proposal underscores concerns about unintended consequences.
“If you bring the caps down, you’re going to restrict credit,” Moynihan said on an earnings call.
That would mean fewer consumers qualifying for cards and lower credit limits for those who do.
Trump has argued that Americans are being “ripped off” by high credit card rates and has framed the cap as a way to ease financial pressure on households.
For banks, however, the proposal adds another layer of uncertainty just as earnings momentum is building.
Confidence builds for 2026
Bank executives were quick to flag risks ranging from policy uncertainty to geopolitical tensions.
Yet the dominant tone on earnings calls was one of confidence that 2026 could prove even stronger, with dealmaking, IPOs, and financing activity set to accelerate.
“As predicted, the capital markets are kicking in with well-capitalized corporates and higher-end consumers driving the economy forward,” Morgan Stanley chief executive Ted Pick said on a call with analysts, noting that the firm posted record wealth management revenue in 2025.
JPMorgan chief executive Jamie Dimon echoed that view, striking a more upbeat tone than in past years when he famously warned of an economic “hurricane” that never materialised.
“In the short run — six months, nine months, even a year — it’s pretty positive,” Dimon said, according to a FactSet transcript.
He pointed to steady job growth, healthy consumer finances, and fiscal stimulus flowing from the Republican-backed One Big Beautiful Bill Act passed last summer.
He also highlighted the potential for deregulation to support growth.
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