- U.S. banks are expected to post sharply higher Q4 profits as investment banking activity rebounds with dealmaking and IPOs.
- Global investment banking fees rose about 15% year over year to nearly $103 billion, and 2025 global M&A volume jumped roughly 42% to about $5.1 trillion.
- EPS forecasts vary widely, led by Citigroup, Bank of America and Wells Fargo, while Goldman Sachs is seen slightly down and Morgan Stanley up.
- Tailwinds include trading strength, loan growth and easing regulation, with key risks from inflation, rate volatility and higher deposit costs.
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The primary source from Reuters projects that US banks will see a notable surge in profits for Q4 2025, primarily because of a rebound in investment banking activity. Global investment banking fees are expected to be almost $103 billion, up about 15% from Q4 2024, matching the second-highest level since 2021. Contributors to the increase include a strengthening IPO calendar, elevated trading volumes across various asset classes, and a substantial rise in M&A transactions globally.
Earnings per share (EPS) outlooks for individual large banks differ significantly. Bank of America, Citigroup, and Wells Fargo are expected to see double-digit growth—Bank of America nearly +17%, Citigroup ~+32%, Wells Fargo ~+17.5%. Conversely, Goldman Sachs is expected to see a slight EPS decline (~5%), reflecting high base effects and potential headwinds in non-investment banking segments. Morgan Stanley is forecast to gain ~8% in EPS, benefiting from its strength in wealth management and investment banking. JPMorgan is expected to post modest gains, somewhat above 3%.
In addition to investment banking, net interest income (NII) and loan growth are identified as key pillars supporting profitability. The lifting of regulatory constraints—especially the removal of Wells Fargo’s asset cap—alongside lower regulatory burdens and proposed policy shifts under the Trump administration are viewed as reinforcing a pro-growth financial environment. Inflation and elevated interest rates emerge as principal risks: they may squeeze margins, affect deposit costs and weaken economic momentum if unchecked.
Strategically, banks with greater exposure to capital markets, M&A advisory, equity and debt underwriting are likely to outperform. Those more heavily reliant on traditional lending may benefit from rising interest rates but face greater risk from rate volatility. Regulation still looms large—changes to capital rules, treatment of deposits, and regulatory constraints will shape competitive dynamics. For investors, watching forward guidance—especially around expense discipline, loan loss provisions, and outlook for interest rates—will be crucial.
Open questions include: to what extent the current deal volume is sustainable versus front-loaded; how rising deposit rates will affect net interest margin; whether inflation will force tighter policy; and how regulatory changes (e.g., capital, oversight) will alter competitive positioning.
Supporting Notes
- Global investment banking revenue rose ~15% YoY to nearly $103 billion in Q4 2025, the second-highest since 2021.
- Total global M&A volume for 2025 came in at ~$5.1 trillion, a ~42% increase over 2024.
- Bank of America’s EPS is expected to increase by nearly 17% in Q4, helped by higher net interest income and increased trading revenue.
- Citigroup is projected to see a ~32% EPS gain due to strength in capital markets and investment banking fees.
- Wells Fargo’s EPS forecast shows ~17.5% growth, supported by lifted regulatory asset caps and expansion in investment banking hiring.
- Goldman Sachs is forecast to see a nearly 5% EPS decline, despite topping M&A league tables, due to high prior gains and likely headwinds in non-capital markets segments.
- Morgan Stanley is expected to post an ~8% EPS increase, boosted by record investment banking revenue and growth in wealth management.
- Analysts point to rising loan growth and expanding net interest margins, aided by pro-growth policies and regulatory easing under the Trump administration.
- Trading across commodities, fixed income and equities continues elevated, supporting markets revenue across large banks.
- Risk factors include inflation, deposit cost pressures, potential asset bubbles, and rate uncertainties.