4 Things to Watch for in Big Bank Earnings

Net Interest Income

The Federal Reserve voted to raise the target range for the federal funds rate by 0.25 percentage points to 3.75%-4.00%. Since then, the yield curve has steepened further (the 10-year has risen more than the two-year). A higher-rate environment, paired with a steeper yield curve, should serve as a tailwind for banks, all else equal. It enables higher net interest margins and, by extension, net interest income for banks due to their asset sensitivity (assets reprice quicker than liabilities) and assets being longer in duration than liabilities (banks “lend long and borrow short”).

Because the Fed’s decision to raise rates came late in the quarter, we don’t expect this to materially impact third-quarter results, but we expect full-year guidance for net interest income to rise across the board, even if modestly, with only one quarter remaining.

The magnitude of revised guidance should be very telling about how the banks foresee a higher rate environment impacting incremental loan demand. If lending demand remains robust, paired with the more attractive rate backdrop, we believe a material raise in full-year net interest income guidance would be the dominant focal point as it indicates the attractiveness of the setup going into the final quarter of 2026 and in 2027.

Credit Quality

The banks’ third-quarter results are largely anticipated to remain healthy in an absolute sense, as they have been for an extended stretch, but direction will be scrutinized via provisioning expenses, sequential net chargeoff results, and updated guidance. Taking the recent Fed rate hike into account, married with the impacts of the energy shock from prolonged conflict rippling through the economy, results and guidance that change minimally from the second quarter would paint an even more attractive near-term backdrop.

State of the Consumer

After strong year-over-year growth in credit and debit spending during the first half of 2026, particularly in conjunction with improved credit metrics reported by the big banks in the second quarter, consumer strength has remained quite resilient.

That said, strong loan growth during the first half of the year was driven more by commercial lending and trade financing than by consumer lending, and September payroll results were disappointing. We will continue to focus on the holistic picture of the consumer, as indicated by credit and debit spending volume results, in addition to delinquencies across credit card, auto, and mortgage, which serve as strong leading indicators for future chargeoffs.

Further, in a K-shaped economy, wherein rising gas prices and stubborn inflation disproportionately impact lower-income households, we will remain keen on any commentary that elucidates the strength of lower-income consumers.

Trading Revenue

Trading revenues through the first half of 2026 have been nothing short of eye-popping, and recent commentary at the Barclays conference regarding anticipated third-quarter results painted a mixed picture. JPMorgan JPM is guiding toward mid-to-high-teens growth year over year, Citi C is looking at more modest mid-single-digit growth, and Bank of America BAC is expecting results to be largely flat from a year ago.

Part of this is explained by differences in business mix, as the trading desks at JPMorgan and Citi have larger exposure than Bank of America to some areas experiencing faster volume growth, like equities and foreign exchange.

We believe we are at or near the peak for trading revenues, particularly for equities, but we do not see an immediate catalyst for a pronounced contraction in 2026, and believe it’s more likely to occur late in 2027 or 2028.