Trading Revenues Surge as Volatility Drives Activity
Despite elevated interest rates and persistent trade tensions, the five largest U.S. banks posted strong second-quarter results, driven by a 17% collective rise in trading revenues and a 7% increase in investment banking revenues compared to the same period last year. Retail investors may be rattled by wild market swings, but for Wall Street, volatility is profitable.
For equity trading desks, market fluctuations fuel business. Banks earned higher fees as trade volumes rose sharply in response to geopolitical shocks and tariff announcements. The consistent churn of transactions enabled institutions to thrive regardless of whether markets rose or fell.
Investment Banking Holds Firm Amid Trade Risks
Contrary to expectations, deal-making remains strong despite ongoing trade uncertainty. Bank executives report that companies are continuing to pursue mergers, IPOs, and debt issuance. Strategic activity hasn’t slowed, with corporate clients pushing forward even as tariff threats loom.
Diversified banking models—spanning trading, advisory, and wealth management—have shielded firms from economic pressures. Banks with multiple revenue streams are proving resilient in uncertain environments.
Major Earnings Highlights from Top Banks
Morgan Stanley reported earnings per share (EPS) of $2.13, beating estimates of $1.93 and up from $1.82 a year ago. Net revenues climbed 12% year-over-year to $16.79 billion, led by equity trading revenue growth of 23% and a 9% increase in fixed-income trading.
Goldman Sachs posted EPS of $10.91, beating the $9.43 estimate and rising from $8.62 last year. Its Global Banking and Markets division surged 24% to $10.1 billion in revenue, with equities and FICC trading leading the gains. The firm also raised its dividend by 33.3% to $4.00 per share following the successful Fed stress test.
JPMorgan delivered EPS of $4.96, above the $4.51 estimate and up from $4.40 a year ago. Revenue came in at $44.91 billion, topping expectations by 2.52%.
Wells Fargo reported EPS of $1.54, exceeding the $1.41 forecast and higher than the $1.33 recorded last year. Fee income grew 4%, aided by gains from a merchant services joint venture.
Citigroup saw EPS rise to $1.96, up 28.9% from the prior year and surpassing the $1.61 consensus by over 21%.
ETFs Positioned to Gain from Bank Strength
With financial institutions outperforming, several bank-focused ETFs are set to benefit. These include the iShares U.S. Financial Services ETF (IYG), iShares US Financials ETF (IYF), Invesco KBW Bank ETF (KBWB), Financial Select Sector SPDR (XLF), and Vanguard Financials ETF (VFH). These funds offer exposure to the sector’s earnings momentum and are likely to attract increased investor interest.