- Big-bank earnings have been mixed, keeping pressure on the sector as investors lean on trading strength to offset weaker core results and policy risk.
- Wells Fargo posted $5.36B in Q4 net income ($1.62 EPS) but missed on revenue and net interest income, with a $612M severance charge lifting expenses.
- Bank of America beat EPS on stronger net interest income and a roughly 10% trading-revenue jump, yet the stock fell as costs and regulation worries mounted.
- Attention now shifts to Morgan Stanley and Goldman Sachs, where trading, wealth management, and investment-banking commentary could drive the next move for bank stocks.
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The recent earnings reports from major U.S. banks illustrate a bifurcated performance: while net interest income (NII) has generally held up due to high rates, many banks have underperformed relative to expectations on revenue, profit, or both, particularly when non-interest income and investment banking activities prove lackluster. Concurrently, regulatory risks, especially proposed caps on credit card rates, are creating uncertainty that is negatively influencing valuations.
Wells Fargo (WFC) showed modest growth but missed most consensus metrics. For Q4 2025 it reported EPS of $1.62 (vs. ~$1.66–1.67 expected), revenue around $21.29–21.30 billion (vs. expectations near $21.65–21.64 billion), and net interest income of $12.33 billion, falling short of ~$12.4 billion forecast. The bank incurred a $612 million severance charge and slightly higher operating expenses ($13.7 billion vs. estimate $13.6 billion). Management forecast ~ $50 billion in NII for 2026, just under analyst expectations.
Bank of America (BAC) was relatively stronger in Q4 – NII rose nearly 10% YoY to $15.75 billion, trading revenue climbed ~10%, and earnings per share beat estimates at $0.98 (vs. ~$0.96). Still, even with these gains, BAC’s stock declined ~3.7%, reflecting pervasive investor concerns.
Regulatory developments are notably impacting sentiment. The Trump administration’s proposal to cap credit card interest rates at 10% has garnered strong pushback from banks including Citi and JPMorgan, which warn that such limits may restrict access to credit and damp consumer economic activity. Such policy proposals are adding premium risk to banks with sizable card portfolios, such as Wells Fargo and Bank of America.
Trading and prime brokerage remain the silver linings. Bank of America saw large gains in its trading segment amid volatile markets, while firms like JPMorgan and Goldman have benefited from strong revenues in their prime brokerage and equities businesses.
Technical outlook & strategic implications: Given that Morgan Stanley and Goldman Sachs are expected to report shortly, their performances in trading revenue, wealth management, and dealmaking will likely be heavily scrutinized. Failure to beat estimates could lead to further downside for bank equities. Conversely, outperformance in trading or net interest income, especially if it persists, may provide tactical entry points. Banks should also prepare strategies to manage potential regulatory margins compression, particularly in credit card lines, and ensure cost discipline remains a priority.
Open questions:
- How material would the impact be on credit card profitability if a 10% interest rate cap is imposed, and how swiftly would banks adjust pricing or risk underwriting?
- Can trading segments sustain current momentum if market volatility subsides, or is recent strength fleeting?
- What guidance will Goldman Sachs and Morgan Stanley provide about investment banking pipelines and wealth management fee growth amid uncertain global economic conditions?
Supporting Notes
- Wells Fargo’s Q4 2025 net income was $5.36 billion, or $1.62/share, down from $1.67/share expected.
- Its net interest income in Q4 was $12.33 billion, short of the $12.46 billion expectation; full-year NII in 2025 was $47.5 billion.
- A $612 million severance cost pushed expenses up in Q4; total operating expenses were $13.7 billion vs. $13.6 billion consensus.
- Bank of America reported ~10% YoY rise in trading revenue ($4.5 billion) and record NII ($15.75 billion) in Q4, delivering earnings per share of $0.98 vs. estimates of ~$0.96.
- The S&P 500 fell 0.5% on January 14, 2026, with bank stocks leading declines after underwhelming bank earnings; Wells Fargo down ~4.6%, Bank of America ~3.7%, Citigroup ~3.3%.
- Proposed 10% cap on credit card interest rates is stirring concerns of profit margin compression across major banks; several top executives have warned it could reduce credit access and harm economic growth.