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This Week in Earnings – Q3'25

The Sector Beat: U.S. Banks

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Our thought leadership this week addresses:​​
26 min. read

Early channel checks with clients indicate general strength in Q3’25 and cautious optimism but not yet outright confidence. On the headwind side that may be underappreciated by investors (based on our recent Inside The Buy-Side® surveys) is the softening labor market and impact of the government shutdown. Conversely, on the positive side is the OBBBA impact in 2026 related to the no tax on tips x overtime, which is expected to result in a meaningful return for workers and thus economic stimulus. Further, evidence of continued incremental investments and hiring versus holding is supportive of shifting growth mindsets as is the level of M&A activity on which we’re engaged. Puts and takes for sure, but whereas we have been battling headwinds, we seem to have some wind at our back, which will hopefully be further strengthened by additional rate cuts expected for this year.

In today’s thought leadership, we cover:

Key Events

U.S. Government Shutdown

  • The U.S. government shutdown stretched into its third week as Republicans and Democrats remain entrenched over key funding disagreements. With no breakthrough in negotiations, hundreds of thousands of federal workers have been furloughed or left working without paychecks, while non-essential services are shuttered. (Source: Reuters)
  • The Bureau of Labor Statistics plans to release the September Consumer Price Index on October 24 after recalling essential staff for this data. The CPI report was originally scheduled for this Wednesday. However, most major economic releases, including the September jobs report and weekly jobless claims, remain on hold until government funding is restored, leaving market participants and policymakers with a limited read on current economic trends. (Source: BLS, Bloomberg)

Global Trade

  • U.S.-China trade relations were in focus this week after President Trump, via Truth Social last Friday, vowed to impose a 100% tariff on Chinese goods beginning November 1 in response to China’s export controls on rare earths. Over the weekend, however, Trump struck a more conciliatory tone, suggesting that “China will be fine.” Markets stabilized as traders interpreted his remarks as an indication that both sides may return to negotiations. (Source: Reuters)
  • On Wednesday, Treasury Secretary Bessent suggested the possibility of extending the 90-day pause on higher tariff rates for China in return for Beijing putting off its recently announced plan to tighten limits on critical rare earths. This morning, Trump stated in an interview that high tariffs on China were “not sustainable” and affirmed he would be meeting with Xi Jinping in South Korea later this month. (Source: Bloomberg)

Global Economic Data

  • China’s September inflation data reaffirmed deflationary pressures as the Consumer Price Index fell 0.3% YoY and the Producer Price Index declined 2.3%. Despite some improvement in core CPI data, softness in household demand and continued PPI contraction highlight ongoing challenges from property weakness and trade uncertainty. (Source: Wind Information, CNBC)
  • Germany final CPI showed the annual inflation rate edged up to 2.4%, in line with preliminary data but up from August’s 2.2% reading. Meanwhile, core annual inflation rose to 2.8% in September from August’s 2.5% level, suggesting price pressures remain stubborn in Europe’s largest economy. (Source: Destatis; Federal Statistical Office of Germany)
  • Eurozone industrial production fell 1.2% MoM in August, reversing July’s 0.5% gain, though the decline was smaller than economists’ expectations of a 1.6% drop. The index now stands at its lowest since January but remains 1.1% higher compared to August of last year. Germany and Italy accounted for much of the weakness in August. (Source: Eurostat)
  • Eurozone final CPI showed the pace of annual inflation rose to 2.2% in September, in line with the preliminary reading but up from 2.0% in August. Persistent service sector inflation and energy price swings are keeping headline rates above the ECB’s target. Meanwhile, the annual rate of core CPI edged up to 2.4% in September from the prior month’s 2.3% reading. (Source: Eurostat)

Recap

Inside The Buy-Side® Q3’25 Earnings Primer®

As noted last week, following last quarter’s survey which found a shift toward cautious optimism, but with investors still wary of tariff impacts and consumer concerns, the Voice of Investor® (VOI) captured this quarter reveals further improvement in sentiment and an increased appetite for growth despite continued cautiousness amid ongoing headwinds.

Key takeaways from our survey include:

  • Investor Sentiment Builds on Last Quarter’s Rebound, with Outright Bullishness Reaching Highest Level Since March 2024; While Most Anticipate In-line Q3 Results, Consensus Beats are Still Expected to Outpace Misses
  • Investors Increasingly Prioritizing Growth over Margins but with a Level of Cautiousness Remaining amid Continued Uncertainties
  • Buybacks Join Debt Paydown as the Favored Uses of Cash, While Reinvestment Interest Rebounds; Tech Remains in the Sector Top Spot, Though Financials and REITs See an Influx of Bulls and Bearishness Recedes across Virtually All Sectors
Corbin Advisors Inside The Buy-Side® Earnings Primer® Q3'25 Cover

Earnings Primer®

Press Release

Quarterly Snapshot

The Big So What® Q3’25 Earnings Season Webinar Replay

The Sector Beat: U.S. Banks

Big banks kicked off Q3’25 earnings season on a strong note, soundly beating Street estimates on both the top- and bottom-line with results powered by robust investment banking and capital markets activity, building on the momentum seen coming out of last quarter. This also comes amid a growing consensus around expectations for the Fed to cut rates by an additional 50 bps by year end (25 bps at both the October and December meetings).

Consistent with findings from our recently published Q3’25 Inside The Buy-Side® Earnings Primer®, executives struck a largely upbeat tone, describing a solid U.S. economy and improving confidence amid easing policy uncertainty and a more supportive regulatory backdrop, yet remaining guarded given ongoing macro and geopolitical risks, and potential softening in the labor market. At the same time, many flagged signs of exuberance and “frothiness” across equity markets and risk assets, underscoring the need for continued discipline.

Regarding the business climate, bank leaders highlighted corporate clients leaning back into strategic activity, with dealmaking described as the busiest in years as CEOs gain confidence in the economic backdrop and their ability to navigate the trade and regulatory environments. Across banks, execs touted strengthening pipelines, a rebound in M&A, and constructive financing conditions.

As for the health of the consumer, big banks continue to bang the drum on “resilience,” pointing to strong spending and credit quality, with delinquency trends holding better than expected. Commentary from regional banks is largely aligned, though this group notes continued stress at the lower-income levels. Meanwhile, recent headlines around troubled auto loans (Tricolor and First Brands) reignited discussion about credit risk, prompting vigilance even as executives framed the events as isolated. JPMorgan’s Jamie Dimon cautioned that “when you see one cockroach, there are probably more.” Heightened investor scrutiny sent regional bank stocks sharply lower on Thursday, though they have stabilized on Friday following some well received earnings.

Finally, technology and AI remained front and center, with banks highlighting tangible progress from prior investments. AI is now being positioned as both a productivity and revenue growth enabler, helping firms “constrain” headcount growth while scaling operations and client engagement.

Key Themes

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Macroeconomic Outlook

Executives See Solid Economy and Improved Confidence, yet Flag Market Exuberance, Policy Uncertainty, and Labor Soft Spots

  • JPMorgan ($832.1B):“The consumer is resilient, spending is strong, and delinquency rates are actually coming in below expectations. Those are facts that we really can’t escape. Talking to economists, people are describing a low-hiring, low-firing moment. You can think of that as potentially explained by employers experiencing high uncertainty. We already have slowing growth. So it’s pretty easy to imagine a world where the labor market deteriorates from here. And if that happens, we’re going to see worse consumer credit performance. I wouldn’t say we’re pounding the table with this view, but we’re noting, as we always do, that there are risks and that the fact that things are fine now doesn’t mean they’re guaranteed to be great forever.”
  • Morgan Stanley ($258.8B): “As macro uncertainty and enormous opportunity uncomfortably coexist, our 2025 YTD results demonstrate both the capability and the capacity to deliver earnings, durability, and generate operating leverage against shifting economic and geopolitical backdrops. The economy may be okay, but the markets have had a huge run, and we are going to chop around or even trade lower.”
  • Goldman Sachs ($237.1B): “There is no question that there’s a fair amount of investor exuberance at the moment with U.S. equity markets consistently hitting record highs over the last several months. Much of this has been fueled by a tremendous amount of investment in AI infrastructure, which has driven significant capital formation. But as students of history, we know that following periods of broad-based excitement for new technologies, there will ultimately be a divergence where some ventures thrive and others falter. While I feel good about the forward outlook on balance, the market operates in cycles and disciplined risk management is imperative.”
  • Citigroup Inc ($178.6B): “The macro environment reflects the global economy that’s proved more resilient than many anticipated. The S. continues to be a pace setter, driven by consistent consumer spending as well as tech investments in AI and data centers. That said, there are pockets of valuation frothiness in the market, so I hope discipline remains. Overall, while growth is cooling somewhat and we’re keeping an eye on the labor market, America’s economic engine is indeed still humming.”
  • BNY Mellon ($76.8B): “Despite a cooling labor market and inflation lingering above the Federal Reserve’s 2% target, the U.S. economy remained resilient.Equity markets continued to climb, credit spreads remained tight, and the Fed ultimately resumed rate cuts. While the finalization of U.S. tax legislation and the prospect of deregulation are positives for the economic outlook, uncertainty and multiple tail risks remain – geopolitical conditions, trade policies, fiscal deficits around the world and the sustainability of enthusiastic markets to name a few.”
  • M&T Bank ($27.9B, Banks): “Businesses continued engaging in capex, though it was heavily in tech, software, transportation and equipment. Although overall economic activity was resilient, we remain attuned to the risk of a slowdown in coming quarters due to the weakening labor market. We continue to monitor the possibility of a prolonged government shutdown and the potential impact on our customers, communities and broader economy. We remain well-positioned for a dynamic economic environment.”
  • Citizens Financial ($22.3B): “The macro environment remains positive, despite continuing uncertainty with respect to fiscal and monetary policies.”
  • First Horizon ($10.4B): “We’re starting to see activity pick up overall and the economy continues to perform reasonably well. On the whole, our clients are growing more confident, navigating tariff uncertainty, and we’re seeing their willingness to take action flow through to solid pipeline momentum. Now that we have been seeing the Fed initiate rate cuts, with potential for more to come, we’re optimistic that this will drive growth across the broader economy.

Strategic Dealmaking Builds Momentum as CEO Confidence and a More Supportive Regulatory Backdrop Drive a Broader Recovery 

  • JPMorgan ($832.1B):“Revived animal spirits is driving demand. We’re seeing very healthy deal flow. We’re seeing acquisition finance come back. We were very involved in a particularly large deal this quarter. From the IPO perspective, there’s a lot of stuff in the queue that’s ready to go. We’re starting to see more M&A activity. It was the busiest summer we’ve had in a long time in terms of announcement activity. The rate environment is good enough to get deals done. It’s a pretty supportive environment.”
  • Bank of America ($383.2B):“We’ve seen a pickup in activity here in Q3. As we’ve seen more certainty around trade and tariffs, and around taxes as well, it’s allowed our client base to make longer-term decisions, and that’s reflected in our investment banking activity. In terms of the pipelines, they’re up over double-digits this quarter. We’ll need to see how the transactions execute in Q4 but it feels like a good environment in terms of M&A at this point.”
  • Morgan Stanley ($258.8B): “Secular themes and pent-up demand have supported an increase in activity across the integrated investment bank. In the quarter, robust pipelines translated into announcements and credit markets were resilient and open, conducive to activity.”
  • Goldman Sachs ($237.1B): “It’s clear from our conversations in boardrooms that after a period of heightened uncertainty and volatility early in the year, many of our clients have navigated and adapted to the current state of play. Many CEOs have shifted their focus back to long-term and strategic decision-making, particularly amid a more supportive regulatory environment. Scale and investing for growth remain paramount, especially in the context of harnessing AI capabilities. I think that we are going to see a very constructive M&A environment through the end of the year into 2026. I’d expect 2026 to be a stronger M&A environment unless there’s some macro disruption.”
  • Citigroup ($178.6B): “In Banking, increased clarity around tariffs and record equity prices fueled CEO confidence. We capitalized on this with Investment Banking fees up 17% with continued growth across all products. We continue to add talent to the team, which will help us deepen or establish relationships that will bear fruit over the next two to three years.”

Still Beating the Drum on the “Resilient” Consumer, Bank Leaders Note Strong but Discerning Spending and Emphasize Limited Low-income Exposure

  • JPMorgan ($832.1B): “Consumer spending remained robust, while income was a bit lower. Consumers and small businesses remain resilient based on our data. While we are closely watching the potentially softening labor market, our credit metrics, including early-stage delinquencies, remain stable and slightly better than expected.”
  • Wells Fargo ($272.3B): “Consumers continue to be resilient as income growth has generally kept pace with increases in inflation and debt levels. You see strong consumer spend and stable deposits, and those things paint a picture of a consistently strong consumer, even though what you read about would lead you to believe that they’re being more cautious. Our results say there’s a high degree of consistency there without any real pockets of slowing.”
  • Citigroup ($178.6B): “Consumers are being very discerning in terms of how they spend. The spend increase that we’ve seen is largely in Branded and that has tended to be in the higher income consumers.”
  • M&T Bank ($28.9B): “If you look at the consumer, we’ve been saying for years that in the lower end, call it the bottom 20%, are really hurting. Those are the ones that are paying the higher credit card yields. It’s just really tough for them when they have to pay these high interest rates. There is definitely stress out there. Sometimes people can only go so long, and then they have to throw in the towel.”
  • Synchrony Financial ($26.0B): “We still think the consumer is in pretty good shape. They’ve been very resilient. We’re not seeing any signs of weakness. We’re actually seeing improvement as we think about spending trends.”
  • Citizens Financial ($22.3B): “When I look at the health of the actual U.S. consumer, it’s very stable. You have to really de-average it to see stress. And it’s in the lower end of the market where you’re seeing deposit stress, some increased overdraft And where they have credit, you’re seeing modest credit stress. We just don’t typically lend to those customers, so it’s not in our portfolio. I don’t see anything that would suggest even a blip in terms of consumer credit right now for us.”

Tricolor and First Brands Stir Scrutiny; Executives Note Reason for Caution but Emphasize Contained Exposure and Disciplined Risk Management

  • JPMorgan ($832.1B): “Given the amount of public attention the Tricolor thing has gotten, it’s worth just saying that’s contributing $170M of charge-offs in the quarter, which we call out on the wholesale side. Also worth noting, there’s been a lot of attention on the First Brands We don’t have any exposure to them. But my antenna goes up when things like that happen. When you see one cockroach, there are probably more. Everyone should be forewarned on this one. First Brands, I put in the same category.“
  • Bank of America ($383.2B): “We’re not really observing anything other than continued strong performance in the credit portfolios. Consumer charge-offs [and] commercial charge-offs came down again. So credit remains in a good place. Now, when you see headlines, do you immediately do a look across on everything? Yes. But the broad message right now is the credit portfolios are performing very well at this point.”
  • Wells Fargo ($272.3B): “Specifically in the auto business, the answer for us is we don’t see any real change in our results. As we talk about becoming a broader spectrum lender, the volumes that we do, at credit levels below what we would have done in the past are very small, but are performing as we would have expected. So no negative surprises there at this point.”
  • Goldman Sachs ($237.1B): “Some of the idiosyncratic names that you give reference to we didn’t have direct exposure The key to credit underwriting is to make sure that you miss some of the more challenged credits. And that all comes down to upfront diligence and having a longstanding track record and an ability to be selective. There’s a lot of demand from clients for us to support them. And we have the ability to be selective with respect to where we extend our balance sheet, make sure it comports with our own standards of risk management.”
  • PNC Financial ($71.5B): “Inside of securitization, we just saw an example of something in the auto space that went bad, where it looks like the underlying collateral was highly correlated with the actual corporate itself. We’ll have to see what comes out of it, but certainly has nothing to do with our book.”
  • First Horizon ($10.4B): “Our consumer lending portion of non-depository financial institutions (NDFI) actually remains very strong. That’s where auto and retail financing would fall. For us, it’s a relatively small book. It’s only about 2% of CNI or about 1% of total. It’s all well within control. We’ve always maintained a full-time team of field examiners. That team has an average of 18 years’ experience, and between that team and outside vendors, we’re onsite one to three times every year at our customer sites to examine the collateral.”

Banks Accelerate AI Investment to Drive Efficiency and Revenue Growth While “Constraining” Headcount Expansion 

  • JPMorgan ($832.1B): “We’re putting a lot of energy into [AI]. We’re spending a lot of money on it. We’ve been doing it for a long time, well before the current generative AI boom. In the end, the proof is going to be in the pudding in terms of actually slowing the growth of expenses. Rather than saying, ‘you must prove that you’re generating this much savings from AI’, which turns out to be a very hard thing and might at the margin result in people scrambling to use AI in ways that are actually not efficient, what we’re saying instead is let’s just do old fashioned expense discipline and constrain head count growth. We know that even if we can’t always measure it precisely there are definitely productivity tailwinds from AI.”
  • Bank of America ($383.2B): “Continued innovation in the deployment of advanced technology and tools helped us to hold expense growth to just 1% YoY, while revenue grew significantly. We believe strongly all technologies help drive that and AI allows you to do things that heretofore haven’t been done. The volume of activity in the company has gone up. To put that in context, over the last 24 hours there were 2 million interfaces where a consumer got an answer from Erica, and that same technology is applied on an institutional basis. So this isn’t something [yet] to come. We’ve been at it a while. Providing constant leverage and constant reinvestment with the same expense base is what we’re after and then growing the revenue faster. So its impact on expenses is felt.”
  • Morgan Stanley ($258.8B):“What we’re seeing is there are many places that one can use AI. It’s not just around efficiency, but it’s also productivity, both on the expense line but also on the revenue line. One is just going through code and being able to work faster. Then you have things that are specific to a Morgan Stanley, and that’s very revenue driven. And then you have things that you can see across all sectors. Parable is something that we’ve been doing really in finance, looking at our data, piloting it through and finding ways to summarize key data that other companies can also take advantage of. It’s extremely powerful. And this is another place where we really are just scratching the surface of what it can do.”
  • Goldman Sachs ($237.1B): “Earlier this morning, we announced to our people the launch of One Goldman Sachs 3.0 Propelled by AI, this is a new, more centralized operating model that we expect to drive efficiencies and create capacity for future growth. This is a multi-year effort that we will build over time, and we plan to measure our progress across six goals: enhancing client experience, improving profitability, driving productivity and efficiency, strengthening resilience and capacity to scale, enriching the employee experience, and bolstering risk management. To start, we are drilling in on a handful of front-to-back work streams that can significantly benefit from AI-driven process reengineering and will help inform our longer-term approach.”
  • Citigroup ($178.6B): “We are committed to embedding AI into how we work. Nearly 180,000 colleagues in 83 countries now have access to our proprietary AI tools and have used them almost 7 million times this year. These tools save hours each day by automating routine work, analyzing data and creating materials in minutes instead of hours. AI-driven automated code reviews have exceeded 1 million so far this year and are dramatically improving our developers’ productivity. This innovation alone saves considerable time, creates ~100,000 hours of weekly capacity and has a very meaningful productivity uplift. In September, we launched the pilot of agentic AI for 5,000 colleagues. It allows complex, multi-step tasks to be completed with a single prompt and the early results are very promising. Finally, we have launched a firm-wide effort to systematically embed AI in our processes end-to-end to drive further efficiencies, reduce risk and improve client experience.”
  • BNY Mellon ($76.8B): “At BNY, AI is for everyone, everywhere and for everything. The investments we’ve made have been focused on creating the technology foundation to go faster, but adoption and success are ultimately driven by culture. By putting AI in the hands of everyone at BNY, we intend to develop fluency and create capacity for our people to focus on higher-value work. This translates to how we show up for our clients and innovate more broadly.”

In Closing

This quarter’s bank commentary reflects a clear continuance in optimism despite operating in what Morgan Stanley described as an environment where “macro uncertainty and enormous opportunity uncomfortably coexist.” Even with ongoing unease, corporate confidence is returning, dealmaking momentum is building, and consumers appear to be on steady footing – at least among the higher income groups that drive most of the spending.

Still, with “pockets of valuation frothiness” in the market and isolated credit events serving as reminders of underlying risk, discipline remains key. As growth narratives gain traction, investors will increasingly look for proof points — not promises — around organic expansion and above-market growth, as well as tangible returns from strategic investments.

Heading into year-end, the most effective investor messaging will pair optimism with credibility, demonstrating conviction in the opportunity ahead while maintaining transparency and candor about realities on the ground.  

Up next week: Industrial Sector Beat.  

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