- Wall Street futures slipped as investors awaited big-bank Q4 earnings, with markets focused on the strength of investment banking, trading, and net interest margins.
- Sector fundamentals look supportive after a sharp rebound in dealmaking and capital markets, though performance is expected to vary by bank.
- Citigroup reported stronger investment-banking fees but earnings were weighed down by losses tied to its Russia exit.
- Inflation and consumer data remain mixed, while potential credit-card rate caps are emerging as a key regulatory risk for bank profitability and credit supply.
Read More
The backdrop for Q4 2025 earnings in the U.S. financial sector is largely supportive, with key growth levers converging. Investment banking revenues have rebounded strongly on the back of robust M&A activity, an improving IPO market, and elevated trading across asset classes. Global deal volume surged ~42% in 2025, with investment banking revenue up ~15%, placing revenue near its highest levels since 2021. These trends are expected to underpin much of the upside for banks in the fourth-quarter earnings cycle.
Bank-specific forecasts suggest strong performance: Citigroup is expected to deliver ~32% EPS growth, Bank of America nearly 17%, and Wells Fargo ~17.5%, largely driven by net interest income (NII) gains, stable trading revenues, and rising deal-flow. However, not all banks are aligned: Goldman Sachs is seen as facing a year-on-year EPS decline due to lower contributions expected from certain volatile businesses.
Inflation remains a key risk. While headline wholesale inflation (PPI) is rising modestly—0.2% month-on-month; 3.0% year-on-year—core PPI was flat month-to-month, indicating downstream price pressures may be subdued. Retail sales advanced solidly (+0.6%), though with clear signs of divergence between higher and lower income households. ~
Meanwhile, policy uncertainty is rising. Proposed interest-rate ceilings on credit cards, including a suggested 10% cap, have drawn regulatory and legislative attention. Banks are warning that such caps could constrain their ability to price risk, reduce credit supply, or change underwriting criteria. Until details are clearer, regulatory risk remains a critical variable for financials.
Strategic implications include the following: banks with stronger capital markets franchises and large investment banking platforms are likely to outperform; firms with higher exposure to credit card income and consumer lending face greater policy risk; and inflation/inflation expectation dynamics will shape Fed policy, which in turn influences net interest margins and banking sector multiples.
Supporting Notes
- Global investment banking revenue rose 15% year-on-year to nearly $103 billion in 2025; global M&A volume surged ~42% to $5.1 trillion.
- Citigroup’s Q4 investment banking fees rose ~35% to ~$1.29 billion; banking unit revenue rose 78% to ~$2.2 billion.
- PPI for November 2025 rose 0.2% month-on-month; core wholesale prices (excluding food & energy) were flat month-to-month and up ~3.0% year-on-year.
- Retail sales in November 2025 increased 0.6% month-on-month, beating expectations; core retail sales rose ~0.4%.
- Analysts expect Q4 EPS growth of ~32% for Citigroup, ~17% for Bank of America, ~17.5% for Wells Fargo; Goldman Sachs expected to decline ~4.9%.
- House Republicans and the administration are considering legislation to cap credit card interest rates at around 10%; financial firms warn of adverse effects on consumer access and bank profits.