Geography and AI drive market volatility, Wall Street trading feast continues: the five major banks are expected to earn $39 billion in transaction revenue in Q2

The Zhitong Finance App learned that the Wall Street trading feast is expected to continue. America's largest banks will kick off the second-quarter earnings season on Tuesday. Analysts expect that J.P. Morgan Chase (JPM.US), Bank of America (BAC.US), Citibank (C.US), Goldman Sachs (GS.US), and Morgan Stanley (MS.US) will have transaction revenue close to $39 billion in the second quarter.

According to reports, five major banks, including J.P. Morgan Chase, Bank of America, Citibank, Wells Fargo, and Goldman Sachs, will be the first to release financial reports on Tuesday, while Morgan Stanley will disclose results on Wednesday. Since 2026, geopolitical tension has continued to ferment, compounded by industrial uncertainty brought about by artificial intelligence (AI), and market volatility has remained high, providing continuous support for the trading business.

Stock traders from a number of major banks are expected to achieve close to record earnings, which is only slightly lower than the record set in the first quarter. Goldman Sachs stock traders expect another good result in the second quarter, and the business's revenue is expected to exceed $5 billion.

Keefe, Bruyette & Woods analyst Chris McGratty said that banks involved in the Asian stock market like Morgan Stanley may benefit from market fluctuations during this period.

Major bank stock traders are expected to hand over the second-best quarterly results in history

J.P. Morgan analyst Vivek Juneja said, “Since mid-May, bank stocks have performed strongly and outperformed the market as concerns about war subsided, consumption growth remained strong, and the market rose sharply.” Financial highlights may include “higher-than-expected investment banking and transaction revenue, and the outlook for these revenues continues to be strong.”

Meanwhile, investors are focusing on who might succeed Jamie Dimon as CEO of J.P. Morgan. UBS analyst Erika Najarian said on Monday, “Considering market expectations and investor positions, Goldman Sachs faces the greatest test.” He added that five of the six largest US banks will announce their results on Tuesday. “It's not easy to stand out. In particular, I expect J.P. Morgan's earnings call will largely revolve around the issue of successors.”

The investment banking business is expected to perform well

The market showed a clear signal in the second quarter: Wall Street investment banks are once again regaining their former glory. As of mid-June, the total amount of mergers and acquisitions that Goldman Sachs bankers have participated in this year has exceeded 1 trillion US dollars, setting the fastest record for an investment bank to reach this milestone.

In the same month, Goldman Sachs and major rivals such as Morgan Stanley and Bank of America facilitated the listing of SpaceX (SPCX.US), the largest IPO in history. Although Elon Musk's company ended up paying extremely low commissions, it was still one of the most expensive deals in Wall Street history. According to media reports, the investment banks that underwrote the SpaceX IPO earned a total of about 500 million US dollars in fees.

Just a few days before SpaceX went public, the Goldman Sachs Investment Bank team rushed forward with one of the largest equity financing projects in history at the time, helping Alphabet (GOOGL.US) raise more than 80 billion US dollars to fund its overall AI expenses.

The team led by Morgan Stanley analyst Manan Gosalia said in the report that they “expect comments on the reserve project to remain positive, in line with what we have heard this quarter, which will lay the foundation for continued strong development in the second half of the year and 2027.”

Recently, however, technology stocks have fluctuated greatly, and the market is beginning to question whether a number of large-scale IPOs under preparation can proceed smoothly. Last month, there was news that OpenAI was considering postponing its listing until next year, and the stock prices of Morgan Stanley and Goldman Sachs fell in response.

Interest rates remained high for a longer period of time

Traders continue to increase their bets that the Federal Reserve may maintain high interest rates for a longer period of time under new Chairman Kevin Walsh, and the market will pay close attention to the impact of this policy on bank performance.

On the one hand, high interest rates increase interest income from bank loans, thereby boosting net profit; but on the other hand, high interest rates increase the pressure on residents to repay their debts, and some banks have to make additional loan loss reserves to deal with the risk of potential bad debts.

McGratty said, “In a context where 'interest rates remain high for a longer time' is the market's benchmark expectation, investors must consider more about the possibility that profit margins will peak.”

The private credit turmoil is beginning to subside

The turmoil in the private credit market that continued to unfold at the beginning of the year has gradually eased, but some funds are still under pressure from investors to redeem them. McGratty pointed out that this field is “currently very calm,” and he will pay close attention to the relevant statements in the financial reports of various institutions.

In April of this year, major banks disclosed their risk exposure in the private credit sector: J.P. Morgan Chase about 50 billion US dollars, Wells Fargo about 36 billion US dollars, Citigroup about 22 billion US dollars, and Bank of America about 20 billion US dollars.

According to analysts at J.P. Morgan Chase, the month-on-month growth rate of loans to non-bank financial institutions has slowed, and the market is questioning the extent to which this slowdown is due to the cooling of private credit business.

J.P. Morgan analysts said, “We are awaiting the release of earnings reports to determine whether this reflects a slowdown in private credit exposure growth.”