Do Bank Earnings Hold The Key?

Analyzing the markets with Richie Naso, a Wall Street veteran of over 40 years and former member of the NYSE.

• DJIA 52-wk: +6.74% | YTD: +8.57% | Wkly: +1.56%
• S&P 500 52-wk: +13.63% | YTD: +13.30% | Wkly: +1.70%
• NASDAQ 52-wk: +22.66% | YTD: +17.45% | Wkly: +2.14%
• SPDR S&P Reg Bank ETF 52-wk: -0.94% | YTD: -2.10% | Wkly: -1.86%

Market Movement

The major indexes ended the week in the green: for instance, the S&P 500 closed around 6,664 (+34.94) and the Dow Jones Industrial Average ended around 46,190.61 (+238.37) on Friday. AP News+1

Over the week:

• Nasdaq rose ~2.1% (led the pack) AP News+1
• S&P 500 rose ~1.7% Investors.com+1
• Dow gained ~1.6% Investors.com+1

Volatility remains elevated: The CBOE Volatility Index (VIX) spiked, reflecting increased investor nervousness. Wall Street Journal+1

Key Drivers

1. Trade & China Tensions

Markets were jolted late the prior week by renewed tariff/rare-earth export concerns between the U.S. and China; however, over this week recovery came as more-dovish comments emerged. On Monday (Oct 13) the market bounced significantly after a softer tone from the White House toward China. Financial Times+2

2. Technology / AI Rotation

Tech, especially semiconductor and AI-related stocks, were a strong driver. For example, Broadcom surged nearly 10 % after an AI-processor deal with OpenAI. Reuters

3. Banking / Credit Concerns & Bond Market

Concerns over bank loan losses and credit exposure helped fuel a move toward safer assets (bonds) and weighed on some riskier stocks. The 10-year Treasury yield dipped near 3.93 % intraday. MarketWatch

4. Valuations & Sentiment Caution

With the market having run hard earlier in 2025, many analysts warned of a correction if trade-/rate-/valuation risks materialize. MarketWatch+1

What to Watch Next

• Earnings season is gearing up: Major banks and tech names will report, which could set the tone. Saxo+1
• Economic data are somewhat delayed due to the U.S. government shutdown, so markets will lean on alternative indicators for growth/inflation clues. S&P Global
• Support levels / trend risk: Technical analysts note that if the S&P 500 falls below ~6,500 it could signal a broader correction. MarketWatch+1

Banks’ Strong Earnings Leave Investors Digging Deeper for Trouble Spots

Earnings from the country’s biggest banks show a booming Wall Street and a solid consumer. But a warning from Jamie Dimon took center stage.

Key Points

About This Summary

Major US banks reported robust third-quarter earnings, indicating strong performance in credit portfolios and consumer resilience.

JPMorgan Chase lowered its expected net charge-off rate for cards to 3.3% from 3.6% for this year, reflecting improved credit quality.

Investment banking operations saw significant growth, with Morgan Stanley’s equity-underwriting revenue surging 80% and Wells Fargo’s fees jumping 25%.

Even as a pair of bank disclosures rattled investors late this week, the largest U.S. banks’ latest financial results were so robust that they left some investors wondering what all the fuss was about.

Third-quarter earnings from the country’s biggest lenders— JPMorgan Chase JPM -0.33%, Wells Fargo WFC -0.86%t, Bank of America BAC +1.67%, and Citigroup C+0.84%—and investment banks Goldman Sachs Group GS -0.97% and Morgan Stanley showed Wall Street is booming, Main Street is humming, and consumers are generally on firm ground.

Across conference calls, analysts and journalists peppered bank chiefs with questions: Are financial risks piling up in ways investors can’t yet see? Are cracks forming in loan portfolios? Do the high-profile bankruptcies of two auto companies this fall mean borrowers are worse off than we thought?

In short, top executives said no.

“We’re not really observing anything other than continued strong performance in the credit portfolios,” BofA Chief Financial Officer Alastair Borthwick said. Like its competitors, his firm’s net charge-offs and delinquencies improved. On the whole, “credit portfolios are performing very well at this point,” he said.

Borthwick’s counterparts generally shared that view. Wells Fargo set aside less money to cover customers who might fall behind on loan payments. Citi said a measure of delinquencies improved over the past year. JPMorgan, the largest U.S. bank, lowered its expected net charge-off rate—a measure of loans viewed as unrecoverable—across cards to 3.3% from 3.6% for this year.

Consumers and small businesses “remain resilient,” said Jeremy Barnum, JPMorgan’s finance chief. Credit would eventually suffer if the labor market weakens, he said, but that is “not happening yet.”

Together, the largest banks—with vast windows into global economies—presented solid messages about consumers’ and businesses’ health. Against sticky inflation, trade wars, a government shutdown, and the Trump administration’s U.S. immigration policy pressuring the labor market, the banks’ results fit a pattern of seeming paradoxes across the economy.

Earning Their Keep

Major U.S. banks' third-quarter financial results topped analyst estimates across the board.

Major U.S. banks' third-quarter financial results topped analyst estimates across the board.

Table with 7 columns and 6 rows. (column headers with buttons are sortable)

• Company / Ticker
• Bank of America / BAC
• Citigroup / C
• Goldman Sachs Group / GS
• JPMorgan Chase / JPM*
• Morgan Stanley / MS
• Wells Fargo / WFC

Note: Data through Oct. 16. *Revenue and expectation on a managed basis, a non-GAAP measure

Source: FactSet, company reports

Stock prices are near all-time highs, while consumer sentiment is weak. Economic activity is flattening and companies are laying off employees, according to the Federal Reserve’s latest Beige Book, even as consumer spending remains high and unemployment is relatively low.

Still, a pall hung over bank earnings this past week. The recent collapse of auto companies First Brands and Tricolor Holdings raised investor worries that something, somewhere, is breaking. Disclosures from regional lenders Zions Bancorporation and Western Alliance Bancorporation about challenges with individual borrowers added to the worries and weighed heavily on bank stocks as this past week came to a close.

“The banks reporting so far have all been fine, actually better than expected,” Truist Securities’ Brian Foran says, citing encouraging credit costs, consumer delinquencies, and troubled commercial assets. “That said, investors are spooked by a third chunky fraud loss in the past six weeks.”

Some bank leaders labeled areas of weakness as one-off items, while noting they are on guard for signs of distress. On Citi’s earnings call, BofA Securities analyst Ebrahim Poonawala noted a rise in corporate and consumer borrowers’ nonaccrual loans and wondered whether the firm saw “red or yellow flags” in its client base. Mark Mason, Citi’s finance chief, said “two idiosyncratic downgrades” drove up corporate nonaccruals, and that he wasn’t seeing concerning trends in consumer delinquency data.

Other major U.S. banks released encouraging credit metrics. PNC Financial Services Group, which is set to expand after striking a deal to acquire a smaller Colorado-based lender, said total delinquencies declined from last quarter. Net loan charge-offs also fell. PNC CEO Bill Demchak said he is comfortable with economic conditions as long as employment holds up and consumers spend.

“I think the economy is fine,” Demchak said.

Banks’ Wall Street operations, meanwhile, are enjoying a boomtime that boosted earnings. Bankers rely on clients’ appetite for dealmaking and confidence in stable capital markets, and traders’ fortunes hinge on loads of volatility. Both groups notched remarkably strong quarters around the industry.

Goldman’s global banking and markets business has driven record revenue so far this year, while Morgan Stanley’s equity-underwriting revenue surged 80% and Wells Fargo’s investment banking fees jumped 25% from a year ago. Morgan Stanley CEO Ted Pick said that while geopolitical uncertainty could prompt “pauses,” investment banking “over the next couple of years should be generally up and to the right.”

As the earnings reports rolled in, shareholders’ reactions were mixed. Morgan Stanley and Wells Fargo stocks hit records, while BofA shares had their best single day since April. But shares of JPMorgan and Goldman slumped.

By the end of the week, the earnings numbers had taken a back seat to comments from JPMorgan CEO Jamie Dimon, who said the Tricolor and First Brands failures gave him pause. He told reporters his bank’s exposure to Tricolor was “not our finest moment.” (Tricolor led to a $170 million charge-off; JPMorgan said it has no First Brands exposure.)

“I probably shouldn’t say this, but when you see one cockroach, there are probably more,” he told analysts. “Everyone should be forewarned on this one.”

Dimon left investors with an image of financiers stamping bugs on their kitchen floors and a message that, sooner or later, trouble would return to banks’ balance sheets.

What Happened Last Week in Financials

A broad drop — financials were among the weaker sectors this week. According to one recap, the S&P 500 Financials Sector fell about -3.0% for the week ending October 10. sterlingcapital.com+2Bogart Wealth+2

Regional bank names took the biggest hit. For example:

Zions Bancorp disclosed a $50 million loan loss, which triggered a steep drop in its shares and rippled through regional banks. Business Insider+1

The SPDR S&P Regional Banking ETF dropped around 7% on Thursday before a partial rebound. Business Insider+1

Big banks and non-regional financials had somewhat better stories:

Analyst forecasts show the broader financials sector is expected to post double-digit earnings growth (e.g., 13.2% year-over-year for the S&P financials in Q3). FactSet Insight

Deal activity (M&A, advisory fees) is lifting parts of the sector: JPMorgan Chase, Goldman Sachs and others are benefitting from strong capital markets and fees. MarketWatch+1

Credit risk and macro concerns are weighing heavily:

Worries about auto-loan defaults, bank loan portfolios and private/alternative credit exposures are driving investor caution. Reuters+1

A rally in bonds (10-year Treasury yield dipping near 3.93%) suggests investors are moving to safer assets. MarketWatch+1

🔍 Key Themes & Drivers

Credit Quality Risk

The disclosure by Zions Bancorp and issues at other regional banks revived memories of the 2023 regional banking stresses. Investors are scrutinizing loan books, default pipelines (especially auto/trucker/consumer loans), and hidden exposures. Business Insider+1

Banks with more diversified or higher-quality loan books (large national banks) are faring better than smaller regional players.

Earnings Growth / Fees Tailwinds

The anticipated growth in deal-making, equity capital markets, and advisory services is a strong positive for the sector at large. MarketWatch+1

Insurers and asset managers also have themes around investment income improving (in a lower rate environment) but underwriting pressures remain.

Interest Rates / Yield Curve / Bonds

With the yield curve flattening (2-yr yields dropping faster than 10-yr), net interest margin (NIM) pressures and deposit cost concerns are emerging for banks.

The rally in bonds (lower yields) may reduce interest income potential and magnify concerns in the financials space.

Macro / Regulatory / Trade & Economic Risk

The ongoing U.S. government shutdown is delaying data releases, which raises uncertainty for banks.

Trade tensions (U.S.–China) and wider economic weakness could hit credit growth, capital markets activities, and banks’ loan books.

Regulatory scrutiny remains on banks, especially around asset quality, capital buffers, and the exposure to alternative credit.

Outlook / What to Watch

• Earnings Reports: Monitor the upcoming results from major banks, asset managers, and insurers. Key metrics include loan-loss provisions, NIM, fee income, and underwriting margins. (Q3-2025 is in focus.)
• Credit Losses / Charge-offs: Keep an eye on any surprise loan-loss disclosures, especially in consumer/auto loans, commercial real estate, and regional banks.
• Interest Rate / Yield Moves: A major catalyst will be how the yield curve evolves. If yields fall further, NIM could compress; if yields rise sharply, funding costs could increase.
• Regulatory / Stress Signals: Watch for regulatory filings or announcements (e.g., banks asking for asset caps to be lifted, capital raises, or stress test results).
• Deal Activity / Capital Markets: Revenues from M&A, IPOs, and advisory fees are a bright spot. If deal flow slows, the positive tailwind could fade.
• Sector Divergence: Large national banks vs regional banks will diverge in performance depending on loan‐book health, funding costs, and geographical exposure.

Follow the bank earnings this week. This could determine the near term direction of the stock market.

— Richie

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