The first wave of US bank results has landed better than expected, with a clear pattern suggesting that investment banking and trading have been the key engines in this quarter, while core banking stayed resilient. JPMorgan beat and lifted full-year net interest income (NII) guidance to $95.8bn, citing robust trading and a firmer deals calendar.

Goldman Sachs, Morgan Stanley-standout numbers

On the pure investment-banking side, Goldman Sachs posted standout numbers as IB fees jumped 42% y/y powering a profit beat and validating the narrative that dealmaking is strong. Morgan Stanley matched that theme and, crucially, overtook Goldman in equities trading with $4.1bn of revenue, underscoring how a healthier primary market and active hedge-fund/prime flows can quickly translate into P&L.

Near term, the read-through is constructive with a combination of strong fee income, contained credit costs and intact capital return. The market has rewarded the early beats, but leadership has been name-specific and sensitive to idiosyncratic headlines. In fact, announcements of exposure to bad loans tied to fraud emerged on Thursday, which hit stocks of regional banks hard. Zions Bancorp said it would charge off about $50m tied to two commercial borrowers at its California Bank & Trust unit after alleged misrepresentations.

Separately, Western Alliance said it’s suing a borrower for fraud and is seeking to recover ~$100m.

This suggests focusing on banks with a diversified fee exposure, clear NII cushions, and credible expense discipline and return targets. At the index level, better-than-feared results help, but macro still sets the multiple.

Outlook for rate cuts

Meanwhile, markets are set on another 25bps cut from the Federal Reserve at the end of the month, with another 50bps of easing by January next year. The outlook for rates still remains clouded by the data blackout resulting from the US government shutdown but the latest readings suggested the period of monetary easing was likely to continue into the new year. For banks, the NII path during easing hinges on deposit betas and remix, which can significantly alter a bank’s sensitivity to interest rate changes. If funding costs roll down faster than asset yields, margin compression is modest; if sticky high-cost deposits linger, NII tightens faster.

Management commentary so far suggests the big banks are positioned to absorb gradual cuts—especially with fee momentum as a partial hedge.

Looking ahead, the focus is going to be on the health of the IB momentum, the strength of the trading market, credit concerns and the outlook of rates from the Federal Reserve. Banks have reported strong advisory/underwriting momentum that is expected to last in 2026 as is the strength of the stock market.

Meanwhile, investors should monitor for any early-stage readings of consumer weakness whilst keeping an eye on the pace of rate cuts from the central bank and how quickly NII compresses.

Daniela Hathorn is a senior market analyst at Capital.com