Wall Street banks are set to report trading revenues of more than $40bn for the first quarter, after the Middle East war and the US military operation in Venezuela rekindled volatility in financial markets.
JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America are next week expected to unveil the highest combined quarterly revenues from their trading businesses in at least 12 years, according to forecasts compiled by Bloomberg and data from Visible Alpha.
That would mark a 13 per cent increase from the first quarter of last year for the five largest American banks, even though early 2025 was unusually volatile because of US President Donald Trump’s trade wars.
“When Russia invaded Ukraine in the first quarter of 2022, we had increased volatility as a result of that. We are going to see it again in the first quarter of 2026 because of the hostilities in the Middle East,” said Gerard Cassidy, an analyst at RBC Capital Markets.
The conflict in the Middle East sparked a record-breaking oil rally and slump in the stock market as well as fears that soaring energy prices could ignite a global wave of inflation and push some economies into recession.
Despite sharp oil price movements, analysts still expect growth in equities trading to be stronger than in fixed income, currencies and commodities trading.
The banks are set to record growth of 13 to 15 per cent in equities and 8 to 13 per cent in FICC, where JPMorgan and Citi are expected to book the strongest gains.
Investment banks were pushed to retool their trading operations following the 2008 financial crisis and are now geared less towards making directional bets on markets and more on facilitating and financing trades for clients.
Fees from investment banking are also poised to continue to rise in the quarter, with analysts forecasting increases of more than 10 per cent at all five banks.
Dealmaking has rebounded in recent months after years in the doldrums, driven by demand for financing for AI projects and a looser regulatory environment.
Although geopolitical uncertainty climbed in the quarter, the banks will have received fees from deals that were announced last year but closed during the first three months of this year.
Profits at the banks are forecast to rise by about 7 per cent overall, with the biggest gains at Goldman and Morgan Stanley. Those banks are most heavily geared towards trading and investment banking.
Analysts have cautioned that investment banking fees could suffer from prolonged conflict in the Middle East. Choppy stock markets could also quash investors’ appetite for public listings.
“If there is going to be a soft spot in the quarter due to this increased volatility it could be in the equities capital markets business,” said Cassidy.
Goldman Sachs will open earnings season on Monday, followed by JPMorgan and Citi on Tuesday. Morgan Stanley and Bank of America release their results on Wednesday.
Investors will also scrutinise banks’ exposure to non-bank lenders following a wave of redemptions in private credit funds driven by concerns about credit quality.
Banks’ lending to private capital firms and hedge funds has boomed in recent years as lenders have sought higher returns at a relatively low capital cost.
