- FactSet projects S&P 500 Q4 2025 EPS growth of about 8.2% year over year (10th straight gain), with revenue growth near 7.8% and margin pressure risk.
- The five biggest U.S. banks generated about $134B of trading revenue in 2025 (+15%), led by equities gains amid elevated volatility.
- Banks are lobbying against President Trump’s proposed one-year 10% credit-card APR cap starting Jan 20, 2026, warning it would restrict credit (especially for lower-score borrowers) and force rewards cuts.
- Implementation remains uncertain without clear legal authority, leaving the impact on bank profits and consumer credit access highly unpredictable.
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FactSet estimates as of mid-January 2026 place S&P 500 Q4 earnings per share (EPS) growth at about 8.2% year-over-year, down from Q3’s 13.6%, but still strong relative to long‐term trends. Seven of the eleven sectors are contributing positive earnings growth, led by Information Technology and Materials; Energy and Consumer Discretionary are lagging, which tempers upside surprises. Revenue growth is estimated around 7.8%, indicating margins may be under pressure given cost inputs and interest rates.
### Trading Boom Fueled by Market Volatility
The five largest U.S. banks achieved combined trading revenue of $134 billion in 2025—a 15% increase from 2024—with equities trading jumping ~24%, and fixed income, currencies, and commodities (FICC) revenues up ~9.3% for the year. In Q4 alone, these banks earned $30.2 billion in trading revenue, with equities rising ~20% through the period. This reflects an environment of elevated volatility, geopolitical uncertainty, and strong hedge fund and institutional activity.
### Policy Risk: 10% Credit Card Interest-Rate Cap Proposal
President Trump has proposed a cap of 10% APR on credit cards for one year, beginning January 20, 2026. Although details are vague, the proposal has already drawn institutional criticism. Banks warn of constrained credit availability—especially to consumers with lower credit scores—reduced rewards programs, and adverse effects on small businesses. CFOs and CEOs from major banks argue that such a cap could reduce the availability of credit and increase the cost of other services; however, some academic research (Vanderbilt) suggests consumers could save around $100 billion annually if enacted, while banks would remain profitable albeit with reduced margins and adjusted offerings.
### Strategic Implications and Impacts for Investors & Institutions
– Profitability Adjustments: Banks heavily exposed to credit card lending (JPM, BAC, COF, AXP) may need to revise risk models, pricing, or limit rewards, potentially compressing margins.
– Credit Access & Consumer Behavior: Caps may disproportionately affect subprime and lower-income borrowers, leading to credit rationing or turn to unregulated lenders; consumer spending could slow, reverberating across sectors reliant on durable goods or discretionary spend.
– Regulatory Uncertainty: The lack of legislative or regulatory detail introduces ambiguity. Market pricing may already price some risk, but banks may hedge or adjust asset mix, e.g., reducing interest-rate-sensitive lending.
– Economic Growth & Inflation Dynamics: If credit tightens, growth could decelerate; conversely, reduced interest charges might boost disposable income, but effects are uneven and delayed.
### Open Questions
– How will banks recalibrate underwriting standards if 10% is enforced? What credit score cutoffs will effectively emerge?
– To what extent can interchange fees and non-interest revenues compensate for interest income losses under a rate cap?
– Will Congress or regulatory agencies provide enforcement mechanisms, or will the proposal stall without legal implementation details?
– How might this policy interact with other cost pressures (regulation, interest rates, input costs) already compressing bank profitability?
– What sectors (e.g., retailers, consumer goods) will feel knock-on effects if consumer credit pulls back?
### Risk Scenarios
– Best case: The cap leads to moderate credit product reshaping, cost savings for consumers, and modest bank adjustments with limited economic damage.
– Base case: Banks respond with constrained credit, rewards reductions, and more selective lending, and the economy slows marginally.
– Downside: Cap causes large credit-cutoff among riskier borrowers, unintended migration to predatory lending, institutional backlash, legal challenges, and potential revenue shocks in bank stocks.
In summary, earnings growth remains healthy, trading revenues are surging under volatility, but the proposed interest rate cap poses a potentially consequential policy risk—likely leading to structural changes in consumer finance and bank revenue models. Investors and financial institutions should closely monitor legislative developments and adjust strategies accordingly.
Supporting Notes
- S&P 500 estimated Q4 2025 EPS growth is about 8.2%, down slightly from prior expectations but still marking ten consecutive quarters of year-over-year growth.
- Trading revenue across five giant banks (JPM, GS, MS, BAC, Citigroup) hit $134 billion in 2025, with equities up ~24% year-over-year; Q4 brought in ~$30.2 billion.
- The 10% APR cap proposal by President Trump would take effect on January 20, 2026, for one year. Critics say major banks oppose it, citing it could severely limit credit access for those with lower scores.
- Academic research (Vanderbilt University) estimates consumer savings from the cap at ~$100 billion annually, while banks could remain profitable by cutting back rewards/perks.
- Bank of America CEO Brian Moynihan warned that lowering caps will lead to “unintended consequences”, such as constricted credit availability.
- JPMorgan CFO Jeremy Barnum predicted “severely negative consequences for consumers” and negative economic impact from such a rate cap.