The second-quarter earnings season for US stocks is about to begin in earnest. Five of Wall Street's largest banks—JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc.—are scheduled to release their Q2 financial results before the market opens on Tuesday, July 14. Morgan Stanley will follow with its report on Wednesday.
Market expectations for the banking sector's performance this quarter are elevated. Overall earnings for the S&P 500 are forecast to grow by approximately 23% to 24% year-over-year, with the financial sector expected to contribute a 12.6% increase in profits. The primary drivers for bank performance this quarter are widely seen as a recovery in investment banking and a significant surge in trading revenue.
Reports indicate that the combined trading revenue for the five major banks in the second quarter is projected to approach $39 billion, with equity trading revenue potentially nearing record highs. Increased market volatility and heightened client trading activity are cited as the main catalysts. For instance, Goldman Sachs is expected to see its equities trading division generate over $5 billion in revenue this quarter.
In investment banking, a resurgence in capital markets activity and landmark deals—such as the largest-ever IPO for a space exploration company and a massive stock offering by Alphabet—have provided substantial support. Global investment banking fee revenue reached $61.4 billion in the first half of the year, marking a 24% increase from the same period last year. Goldman Sachs has advised on over $1 trillion in merger and acquisition transactions in the first six months of this year, setting a record for the fastest pace to that milestone.
In contrast, consumer banking performance is anticipated to be more mixed. While commercial and industrial loan growth is accelerating, investors will be closely monitoring indicators such as deposit costs, loan demand, and consumer credit quality. The sustainability of net interest income is emerging as a new focal point for the market.