US Bank Profits Surge on Investment Banking Jump in Fourth Quarter

U.S. banks are expected to report stronger fourth-quarter profits in early January, driven by a surge in investment banking revenue. Deal-making activity accelerated in 2025, pushing global investment banking revenue to nearly $103 billion, the second-highest since 2021. Analysts attribute this to a revival in mergers and acquisitions, elevated trading volumes, and an improving IPO calendar.

JPMorgan Chase will be the first major U.S. bank to report earnings on January 13. The lender is expected to see its investment banking fees and markets revenue boost fourth-quarter results. Citigroup, Bank of America, and Wells Fargo will follow on January 14, while Goldman Sachs and Morgan Stanley are scheduled for January 15.

The fourth quarter created ideal conditions for investment banking, according to Stephen Biggar, an analyst at Argus Research. Factors such as increased M&A activity and elevated trading levels contributed to higher revenue for the banks.

Why Did This Happen?

Mergers and acquisitions volume in 2025 surged to $5.1 trillion, up 42% from 2024. Goldman Sachs led the M&A rankings, while JPMorgan led in overall investment banking revenue. Analysts expect pro-growth policies under President Donald Trump, lighter regulations, and lower interest rates to drive further loan growth.

Loan growth and higher net interest margins are key factors supporting bank profits. Sean Dunlop, a Morningstar analyst, noted that banks will likely continue to benefit from a healthy U.S. economy and strong GDP growth in 2026.

How Did Markets React?

Foreign portfolio investors pulled out ₹7,608 crore from Indian equities in the first two trading days of January 2026. This follows a year of sustained outflows due to global trade tensions and currency volatility. Despite the cautious start, analysts believe domestic economic fundamentals may attract foreign inflows later in 2026.

Global markets remain sensitive to geopolitical developments. The U.S. capture of Venezuela's President Nicolas Maduro has created uncertainty, with analysts noting potential short-term shifts in safe-haven assets and oil prices.

Investor sentiment is also shaped by JPMorgan's upcoming dividend announcement and earnings report. The bank declared an ex-dividend date of January 6, with a payment on January 31. Analysts have adjusted price targets for JPMorgan, reflecting improved performance and market conditions.

What Are Analysts Watching Next?

Analysts will closely monitor inflation trends and interest rate developments as they could affect bank profits. If rates remain elevated, asset prices may stay high, but deal flow could slow.

Earnings reports for the six largest U.S. banks will offer insights into broader economic trends. For example, Bank of America's CEO expects markets revenue to rise between a high single-digit and 10% in the fourth quarter. Citigroup's investment banking fees are expected to jump due to increased deal activity.

Wells Fargo, which recently lifted its asset cap, is expected to see a 17.5% rise in earnings per share in the fourth quarter. Morgan Stanley is projected to see more than an 8% increase in earnings per share, driven by strong investment banking performance.

Goldman Sachs may see a decline in earnings per share compared to the previous quarter. However, it is expected to benefit from strong M&A advisory fees.

Investors will also pay close attention to JPMorgan's spending plans for 2026. The bank's shares fell in December after an executive announced rising expenses.