Stock-trading desks look set for another strong print, with forecasters pegging nearly $19 billion in combined equity revenue across the five biggest US banks. That marks a clear departure from the year's first six months, a period when equity and fixed-income teams were both humming and it seemed as though everyone was winning.
"For the first half of the year it's almost like everybody won, and now that might not be the case," said Wells Fargo's Mike Mayo. "There's likely a wider dispersion this quarter between the winners and losers."
Analyst estimates compiled by Bloomberg through Thursday's New York close indicate that Goldman Sachs, set to report Tuesday, should come out on top with $5.1 billion in equity-trading revenue, with Morgan Stanley at $4.9 billion and JPMorgan at $4.5 billion. Bank of America's equities unit is seen at $2.6 billion. Analysts also expect equity-trading revenue to improve in the third quarter, with Q3 2026 projections based on average estimates.
Higher rates can boost what banks earn on loans, but they have been tougher on trading fixed-income products. Across the five biggest US banks, fixed-income trading is projected to bring in a bit above $19 billion in the period, down from more than $21 billion in the prior quarter, and set to be the weakest quarter for that business so far this year.
Several leaders have already waved the caution flag. Bank of America shares slid sharply in mid September after CEO Brian Moynihan said fixed-income trading would be down for the third quarter. Around the same time, Goldman's David Solomon said fixed income was softer than equities, which had remained "very strong."
Rising yields are also shaking up bank balance sheets. Changes in the value of certain holdings can flow through accumulated other comprehensive income, creating mark-to-market losses that make results lumpier.
On the underwriting side, there is a built-in source of activity. "When it comes to debt underwriting, there is a wall of refinancing over the next three years that's to some degree baked in," Mayo said. "But if rates continue to increase, that could hurt demand for bonds." And looking ahead, Bank of America analyst Ebrahim Poonawala expects capital-markets activity in the second half of 2026 "will be markedly weaker" than the first half, raising questions about the "sustainability of the current capital-markets cycle."
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AI worries have been swirling, including the idea that software agents could nudge deposits away from banks, and that has weighed on some shares. The KBW Bank Index just logged its toughest third quarter since Q1 2023, when the US regional banking turmoil began. As Morgan Stanley's Manan Gosalia put it, "The stocks have clearly sold off given concerns around capital markets revenue growth that's slowed this quarter, concerns around higher funding costs, concerns around the AI-driven cash optimization tools."
Recent performance data also show a split, with Citi out in front while Bank of America's stock is tracking a decline for the year.
Even with the hit to sentiment, some see opportunity. Analysts including Mayo and Gosalia say the AI-fueled slide looks exaggerated. "This whole AI investment cycle is a multiyear investment cycle and it spans more than just the hyperscalers," Gosalia said. "That's going to help capital markets over multiple years." "We see this selloff as an attractive entry point," Gosalia said.
The deal machine looks uneven. Announced M&A in the three months through September dipped about 10% from a year earlier, and several IPOs hit speed bumps. Oura pulled its September float and Bamboo Insurance Services, backed by CVC Capital Partners, also postponed its debut.
There were positives too. IPOs have been a relative bright spot this year, including SpaceX listing in June in a record-setting offering. Bloomberg News reported that Anthropic PBC plans to meet prospective investors next week as it gears up for its own IPO. In September, Jefferies offered an early read on the quarter with record results in its investment bank and equities unit, while fixed-income trading net revenue fell 26%.
On the pipeline, JPMorgan CEO Jamie Dimon contrasted regions. "If you talk about Europe's IPOs, M&As activity pipe - it is pretty good," he said on Tuesday. "If you talk about the United States, there's probably a little bit of a slowdown in September."
Despite the slowdown worries, analysts see year over year gains in investment-banking fees for the biggest players this quarter, with JPMorgan up 15%, Goldman up 8.1%, and Morgan Stanley up 1.9%.
If you own bank stocks, this earnings season looks like a split screen. Equity-trading businesses are set to put up solid Q3 numbers, while fixed income grapples with higher rates and choppy marks that can filter through AOCI.
The broader backdrop is mixed too. M&A cooled by roughly 10% and some IPOs paused, even as other listings moved ahead and fee forecasts still point higher at JPMorgan, Goldman, and Morgan Stanley. Meanwhile, AI jitters took a bite out of bank shares, but several analysts argue that reaction went too far and that the industry's role financing AI could underpin activity over multiple years.
The swing factor remains rates. They are helping some corners of banking and pinching others, which is why results may showcase the "wider dispersion" Mike Mayo flagged between the leaders and the laggards.
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