Big Bank Q3 Earnings: Equity Trading Lifts Profits, Rates Loom

A strong quarter that came with warnings

The six largest U.S. banks reported strong third-quarter profits this week. Their executives also gave some of the most specific warnings in years about where interest rates and inflation could go next. JPMorgan Chase, Goldman Sachs, Citigroup, Wells Fargo, Bank of America and Morgan Stanley together earned about $43.5 billion in the three months ending September 30, and all six reported within about 36 hours.14 The Associated Press summed up the mood: the lenders posted higher profits than a year earlier, helped by consumers who keep paying their bills and companies that keep spending on AI. The same banks warned that higher rates and stubborn prices could eventually wear down households.79

The combined total hides how uneven the results were. Goldman beat profit forecasts by the widest margin, while JPMorgan and Bank of America fell short.26 The quarter's main lesson is that equity trading desks carried most of the gains, while interest rates have become the issue investors and executives care about most.

Who beat, who missed

Goldman was the clear standout. It earned $5.29 billion, or $17.01 a share, up from $4.1 billion, or $12.25, a year earlier.27 Net revenue rose 23% to $18.68 billion.23 Estimates of how far Goldman beat expectations vary because forecasters used different consensus figures. CNBC cited an LSEG consensus of $13.02 a share, Investing.com cited $13.09 and noted an earlier Reuters figure of $12.44, and Yahoo Finance used $13.50.22923 Every version shows a very large beat. Equities revenue jumped 72% to $6.44 billion.22

JPMorgan had its first earnings miss in almost three years.1 Net income rose 6% to $15.3 billion, or $5.57 a share. Excluding $658 million in securities losses, earnings were $5.75 a share, still below the roughly $5.90 analysts expected.23 CNBC traced the miss to two things: fixed-income trading revenue of $5.4 billion, about $550 million below estimates, and costs that grew 12% while revenue grew 8%.212 JPMorgan's revenue figures differ between reports. Yahoo Finance cited reported net revenue of $50.2 billion, while CNBC and Benzinga cited managed revenue of $50.91 billion. The two numbers are calculated differently.238

Citigroup beat on both earnings and revenue, at $2.85 a share on $23.85 billion.2 CEO Jane Fraser said it was the bank's best third-quarter revenue in a decade.4 The size of Citi's profit increase depends on the measure. The AP and Mint reported a 40% jump to $5.25 billion, while FT commentary put it at 17%.72728 Part of the difference comes from the comparison period. One analysis noted that Citi's growth looks larger against a 2025 quarter that included a goodwill impairment, and that excluding a prior-year one-time item, earnings-per-share growth was 27% rather than 53%.12

Wells Fargo earned $5.95 billion, or $1.87 a share, slightly beating estimates.5 Revenue of $21.87 billion missed the $22.3 billion forecast, the third revenue miss in four quarters.1120

On Wednesday, Morgan Stanley beat expectations with $3.03 a share on $20.34 billion in revenue. Its equities revenue came in about $909 million above forecasts.16 Bank of America had the weakest report. Profit fell 17% to $6.93 billion, or 91 cents a share, after a regulatory penalty, and revenue missed by about $570 million.13

Stock trading did the heavy lifting

The results followed the same pattern almost everywhere. Equities trading rose 72% at Goldman, 49% at JPMorgan, 41% at Morgan Stanley, 14% at Citi and 11% at Bank of America. Fixed-income trading was flat or down at most firms.14 Bank of America's bond trading fell 17% to $2.55 billion, with weakness in mortgages, municipal bonds and credit.13 The Financial Times said JPMorgan and Goldman both reported unexpected declines in fixed income.28 Analysts at Oppenheimer called the gap between equities and bond trading at JPMorgan "odd," since the two usually move together.28

This matters because equity revenue tends to drop first when markets fall. One analysis pointed out that this quarter depended heavily on stock markets trading near record highs.14 Dealmaking is mixed. Goldman's investment banking fees rose 21% from a year earlier but fell 5% from the second quarter. Dealogic data showed global investment banking revenue down 6.6% year over year.21 JPMorgan's CFO said some deals are being "delayed," and Dimon said trading and banking activity eased somewhat during the quarter.2 Whatever the CEOs say, the trading boom looks like it is cooling.

Higher rates help and hurt at the same time

The warnings about rates are the most important part of this earnings season. In his statement, Dimon credited strong business investment and consumer spending. He also said large fiscal deficits, sticky inflation, high asset prices, rising rates and geopolitical tensions "continue to shift under the surface."1 Speaking to reporters, he was more direct. A move in rates from 5% to 6% would hurt more than the move from 4% to 5%, because borrowers would have to refinance at higher costs and credit spreads could widen. He stressed that he was not predicting it, only that people should be ready for it.2

The backdrop explains why he raised it. By the end of September, the 10-year Treasury yield had risen to about 5.3%, its highest level in more than 20 years.2 The AP reported that higher prices for diesel, technology and food led the Federal Reserve to raise rates last month despite pressure from the White House.1 Investopedia linked the stubborn inflation partly to the continuing war in Iran.6

For lenders, higher rates cut both ways. Banks can earn more on new loans, but they also have to pay more to keep deposits from moving into money market funds and Treasurys. Loan demand can weaken, and borrowers can default.2 So far, the benefits show up most clearly. JPMorgan's net interest income, which is what it earns on loans minus what it pays on deposits, rose 13% to $27.1 billion, and the bank raised its 2026 forecast to about $106.2 billion.8 Wells Fargo's CFO said the higher-rate environment is starting to help the bank's interest margin.2

The costs are also appearing. Mortgage rates well above 7% are slowing housing, and Wells Fargo said mortgage originations were its only business not growing.5 Goldman's David Solomon said rising bond yields "doesn't scare me."5 He also acknowledged that the growing financing needs of the AI build-out could push rates up and hurt the economics of some projects.2

Credit looks fine for now

Credit quality is holding up, with some signs to watch. Wells Fargo CEO Charlie Scharf said delinquencies are low and customers are spending more, and that AI investment, strong employment and wage growth still outweigh the risks.6 Bank of America's card loss rate improved to 3.22%.18 Banks are still adding to reserves. Wells Fargo's provisions rose about 51% while actual charge-offs rose only about 3%. JPMorgan set aside $539 million in net new reserves.12 Citi's credit card profits fell 8%, partly because of higher provisions.22 Our reading is that banks are preparing for credit trouble that has not arrived yet.

Regulators and capital

Regulation shaped several of the results. Bank of America's quarter was hurt by a $1.2 billion penalty after Treasury regulators said it failed to report billions of dollars in suspicious transactions.13 Wells Fargo, by contrast, is benefiting from regulators lifting its asset cap.1 Average loans and deposits each grew 11%, a pace the cap would not have allowed.14

Capital rules are the bigger issue. Fitch said U.S. regulators could finalize the Basel III capital framework before year-end, with phase-in possibly starting in early 2028. Lower risk weights for loans could raise regional banks' core capital ratios by about 100 basis points, giving them room to increase buybacks or dividends.33 Wells Fargo management estimates the proposal could reduce its risk-weighted assets by about 7%. Higher rates, however, have already lowered Wells Fargo's capital through unrealized securities losses, leaving its main capital ratio at 10%, the bottom of its target range. Bank of America's ratio of 10.9% is only 90 basis points above its regulatory minimum.

JPMorgan made the most notable capital decision. It cut buybacks to $664 million from more than $6 billion in the prior quarter. Dimon said putting the bank's roughly $30 billion of excess capital to work at good returns is a better use than buying back stock.28

Investors were not impressed

Bank stocks did not rally on the results. One tally found all six fell on their earnings day, from a 0.2% dip at Goldman to a 5.6% drop at Citi.26 Early reports had shown Goldman up nearly 4% before the opening bell, so the gains faded during the day.21 Bank of America fell 7.2% shortly after the open.15 The S&P 500 Banks Index had already lost 5.4% during the third quarter while the broader market rose.2

Our reading is that investors are pricing in two things the banks themselves are flagging. A trading boom tied to stock markets near record highs is unlikely to last, and higher rates that help lending income now could hurt borrowers later. The banks are still very profitable, but their outlook depends heavily on what happens to interest rates.