US banks are expected to reveal substantial earnings growth as they navigate the impact of recent tariff announcements made by former President Donald Trump. With the second-quarter results on the horizon, analysts are predicting overall increases in trading revenues across all six major US banks.
The surge in trading activity can be tied to record-breaking trading days following Trump’s “Liberation Day” tariffs announced in April. Notably, Goldman Sachs Group Inc. is anticipated to lead in equity trading with projected earnings of $3.7 billion, while Morgan Stanley is closely behind. In the fixed income, currencies, and commodities sector, JPMorgan Chase & Co. is expected to top the earnings chart with $5.2 billion, followed closely by Citigroup Inc.
Despite the optimistic revenue forecasts, there remains uncertainty about how banks will leverage new policies emerging from Washington to further boost profits. Proposed regulatory changes aimed at easing capital requirements could give banks an advantage in reclaiming market share from non-traditional market-makers that have rapidly expanded in recent years, such as Jane Street Group and Citadel Securities.
The relaxation of the supplementary leverage ratio (SLR) could free banks to hold greater quantities of US Treasuries and further enhance their capabilities in lucrative segments, potentially unlocking an estimated $70 billion in capital across the six largest US banks due to recent changes to the Federal Reserve’s stress test.
Investors will be keen to hear how bank executives plan to deploy this additional capital, particularly in competitive areas such as prime brokerage. Analyst Erika Najarian from UBS Group AG highlighted the importance of this moment, noting the challenge for established firms like Goldman and Morgan Stanley to regain market dominance from non-bank competitors.
While the trading outlook is strong, the results from investment banking may show a mixed bag next week, primarily due to the uncertainties created by the trade war. Some banks are expected to report revenue increases from significant deals closed during the quarter, while others, such as JPMorgan and Bank of America Corp., may see declines in their investment banking revenue.
Overall, the results from these banks not only reflect the immediate impact of regulatory changes but also present a hopeful outlook for their future growth as they adapt to new financial landscapes.