US Banks Anticipate Surge in Profits Amid Trading and M&A Revival

Major U.S. banks are poised to report increased profits for the second quarter of 2025, driven by robust trading activity and a modest revival in investment banking. Analysts anticipate that institutions such as JPMorgan Chase, Citigroup, and Wells Fargo will surpass earnings expectations, reflecting a recovery in mergers and acquisitions (M&A) following a 20-year low in April.

In April 2025, M&A activity plummeted to its lowest point in two decades, primarily due to escalating trade tensions and geopolitical uncertainties. However, the subsequent easing of these tensions has led to a modest revival in investment banking activities. "We expect second-quarter investment banking revenues to be better than expected and management teams to point to pipelines building," said Betsy Graseck, a banking analyst at Morgan Stanley.

Trading revenues are also expected to remain strong due to ongoing macroeconomic and geopolitical instability. Analysts at Goldman Sachs noted, "We continue to expect the trading revenue to remain buoyant in the near future given the uncertain macroeconomic and geopolitical backdrop."

Bank-Specific Projections:

• JPMorgan Chase: The largest U.S. lender is predicted to report earnings per share (EPS) in line with positive expectations. Investors will focus on the bank's outlook on net interest income (NII), loan growth, and investment banking. Analysts are also watching for any developments regarding regulatory impacts.

• Citigroup: Analysts see Citigroup's earnings outperforming earlier projections. However, expenses and provisions may also exceed previous estimates. Citi is favored by analysts.

• Wells Fargo: Operating expenses will decrease slightly, according to analysts at Raymond James. Loan loss provisions are expected to remain stable. The bank was recently released from regulatory sanctions, providing a more favorable outlook.

The banking sector's positive outlook is bolstered by a deregulatory environment under President Trump. Notably, banks have recently passed the Federal Reserve's stress tests, indicating strong capital positions and resilience.

The anticipated increase in bank profits reflects a broader economic recovery, potentially leading to increased investor confidence and economic stability. However, the resurgence in M&A activity and trading revenues may also raise concerns about market volatility and the sustainability of such growth, especially in the context of ongoing geopolitical tensions and trade policies.

As major U.S. banks prepare to release their second-quarter earnings for 2025, their performance will serve as a barometer for broader economic trends and investor sentiment.