Wall Street’s biggest banks entered the second half of 2026 after one of their most profitable half-years in at least a decade. Then interest rates rose.
When they release third-quarter results on Tuesday, starting with JPMorgan Chase (JPM), Goldman Sachs (GS), and Citigroup (C), followed by Bank of America (BAC) and Morgan Stanley (M.S.) on Wednesday, investors will be looking for clues as to whether the sharp rise in interest rates is not starting to spoil the boom of the first half.
Profits at these giants are expected to decline from last quarter as their trading, trading and financing revenues are expected to decline from the levels that delivered stellar second-quarter results, according to analyst estimates compiled by Bloomberg. Still, most are expected to post higher profits compared to last year, with Bank of America and Morgan Stanley expected to be the exceptions.
“Right now, you look out the window, and you feel good. I think it’s more about the risks than what’s going out the window,” said Brendan Coughlin, president of regional lender Citizens Financial Group (CFG), who will report later next week.
Investor sentiment has already deteriorated. Collectively, these five banks have lost about $270 billion in market value from their respective summer highs through Friday’s close, even though the S&P 500 (^GSPC) remains up about 14% this year.
“Much of the recent underperformance of banks is due to the dramatic rise in long-term rates,” Erika Najarian, an analyst at UBS, told clients recently. A Truist Securities survey earlier this month found that only 35% of institutional investors expect bank stocks to outperform the broader market, down from 68% in July and 82% in December.
Next week, investors will focus less on what rising borrowing costs mean for third-quarter earnings than on whether the rapid revaluation of money will begin to undermine the unusually strong activity that defined the first half of 2026.
Higher rates may initially increase banks’ lending revenue, but they also increase the costs of deposits and wholesale funding, put pressure on bond portfolios and complicate calculations for traders.
The speed of changes in rates also adds to the unease. Macquarie strategists noted this week that many of the most high-profile financial explosions over the past 50 years has occurred shortly after sharp movements in long-term bond yields.
Trading results should provide the most immediate evidence of a Wall Street slowdown. In September, bank executives telegraphed more subdued activityespecially in fixed income, compared to the frenzy that broke out this spring.
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