Expect Q3 bank earnings to reflect increased IPOs, M&A ; watch for NII guidance

Capital markets are expected to drive Q3 earnings for large-cap banks when they start to report results on Tuesday. The earnings seasons kicks off with four of the U.S.’s largest banks JPMorgan Chase (NYSE:JPM), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), and Wells Fargo (NYSE:WFC) disclosing results. In addition, BlackRock (BLK) earnings will give investors a view of what’s happening in the asset manager sector.

Most large-cap banks are expected to report Q3 EPS exceeding those of the year-ago period. In addition, analysts have been revising their estimates higher for most large-cap banks, especially over the last one-month and three-month periods, indicating a sense of optimism.

Among the globally important systemic banks (“GSIB”), Citigroup (NYSE:C) is forecast to log the strongest year-over-year EPS growth as the bank’s restructuring takes hold, followed by robust bottom-line growth at Goldman Sachs. For the regional banks, Citizens Financial Group (NYSE:CFG) is seen posting Q3 EPS that topped the year-ago period by 30%. (See table below.)

Bank of America Securities analyst Ebrahim H. Poonawala notes that capital markets-driven EPS beats are already baked into stock valuations, so he doesn’t expect trading/investment banking beats to drive stock rallies when earnings are released.

Rather, he’ll be keeping an eye on guidance for banks’ net interest income Q4 exit rates. That’s “likely to be a swing factor for EPS revisions and stocks as investors position for a series of Fed rate cuts looking into 1H26,” he wrote in a note to clients.

Also, as regulatory clarity increases, he expects messaging on how banks deploy their excess capital to be closely watched. “We would still expect banks to maintain a steady pace of share buybacks,” he wrote. “CET1 capital ratios for the GSIB banks (ex. trust banks) at 14.5% as of 2Q25 vs. 11.9%/11.5% minimum regulatory requirement effective Oct. 1 (with/without two-year averaging for the SCB).”

With the economic outlook still clouded, credit quality and the health of businesses and consumers are another focus. BofA’s recent conversations with ~40 Canadian and U.S. banks indicate that “credit trends look relatively benign,” he said.

For its coverage of large cap banks, BofA has revised its Q3 EPS estimates up by 1.7%, on average, implying 15.2% year-over-year growth. Key changes to its H2 2025/FY2026 forecasts factor in updated capital markets for stronger-than-expected M&A/IPO/trading revenue, the impact of Fed rate cuts weighted on near-term outlooks, and right-sizing capital levels to reflect lowered regulatory minimums due to the 2025 stress test results.

Morgan Stanley analyst Betsy Graseck favors Citi (NYSE:C), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS) and JPMorganChase (NYSE:JPM) ahead of earnings, on the expectation of investment banking fee and trading revenue beats.

The firm kept its median of Q3 2025 EPS estimates unchanged for the large-cap banks that it covers, but slightly increased Q3 2025 money center EPS estimates on capital markets mark-to-market.

However, Wolfe Research analyst Steven Chubak says investors are voicing concern about some of the money center banks. They’re concerned that Bank of America (NYSE:BAC) may guide to the lower end of its Q4 NII exit rate range of $15.5B-$15.7B. On Citi (C), they’re concerned about hints of higher expenses.

For Wells Fargo (NYSE:WFC), the concern is over the potential to lower its 2025 NII guide. “While we see less risk in the near term, we do see greater risk to consensus NII forecasts looking out to 2026/27 given lower rates / less of a tailwind from reinvestment vs. peers,” Chubak wrote. His top picks among money center banks are Bank of America (NYSE:BAC) and Citi (C).