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This Week in Earnings – Q4'25

The Sector Beat: U.S. Banks

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Our thought leadership this week addresses:​​
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In today’s thought leadership, we cover:

Key Events

Geopolitics

  • Iran has entered its third week of protests, initially triggered by worsening economic conditions, including high inflation and rising living costs, and increasingly reflecting broader political dissatisfaction. The Trump administration has commented publicly on the unrest and continues to apply economic pressure, including a 25% tariff on goods from countries trading with Iran, though no formal decision on military action has been announced. (Source: Bloomberg, WP, AP News)
  • On Thursday, the U.S. completed its first sale of Venezuelan oil, valued at about $500M, with additional sales expected in the coming days and weeks. The announcement followed a White House meeting earlier in the week with U.S. energy executives, many of whom expressed caution about large-scale investment in Venezuela’s oil sector given legal, commercial, and political risks. (Source: Bloomberg, CNN, Reuters)

Politics & Policy

  • Federal Reserve Chair Jerome Powell said the Justice Department has issued a grand jury subpoena related to testimony he provided on the Federal Reserve’s renovation project. In a video response, Powell said the threat of criminal charges is a consequence of the Fed “setting interest rates based on our best assessment of what will serve the public” rather than following the President’s preferences. Powell has since received public backing from global central bank leaders, bank CEOs, some members of Congress (including Republicans), and other policymakers. (Source: WSJ, CNBC).
  • The U.S. State Department is reportedly planning to pause the issuance of immigrant visas for nationals from approximately 75 countries, including Brazil, Somalia, and Iran. While the order has not yet been formally released, reports suggest the measure would apply to individuals seeking permanent residency and employment in the U.S. (rather than tourists or temporary visa holders). The pause is expected to take effect on January 21 and is intended to address what the State Department described as “the abuse of America’s immigration system…”, according to spokesman Tommy Pigott. (Source: Bloomberg, Reuters)

U.S. Economic Data

  • The U.S. Consumer Price Index rose 0.3% in December, in line with expectations, bringing the YoY increase to 2.7%. Core CPI, which excludes food and energy, increased 0.2% in December and 2.6% annually. The increase was driven largely by airline fares (+5.2%), recreation (+1.2%), apparel (+0.6%), personal care (+0.4%), and medical care (+0.4%). These gains were partially offset by declines in communication – (-1.9%), used cars and trucks (-1.1%), and household furnishings (-0.5%). (Source: BLS)
  • The U.S. Producer Price Index increased 0.2% in November, in line with expectations, following gains of 0.1% in October and 0.6% in September, bringing the YoY increase to 3%. The monthly increase in final demand prices was driven by a 0.9% rise in final demand goods, while prices for final demand services were unchanged. Producer prices excluding food, energy, and trade services rose 0.2% in November, following a 0.7% increase in October. On a 12-month basis, core producer prices increased 3.5%, marking the largest annual gain since March. (Source: BLS)

Policy-by-Post

  • January 9, President Trump posted about a one-year cap on Credit Card Interest Rates: “Please be informed that we will no longer let the American Public be ‘ripped off’ by Credit Card Companies that are charging Interest Rates of 20 to 30%… AFFORDABILITY! Effective January 20, 2026, I, as President of the United States, am calling for a one year cap on Credit Card Interest Rates of 10%…” (Source: Truth Social)
  • January 12, President Trump stated a 25% tariff of any country doing business with Iran: “Effective immediately, any Country doing business with the Islamic Republic of Iran will pay a Tariff of 25% on any and all business being done with the United States of America. This Order is final and conclusive.” (Source: Truth Social)
  • January 14, President Trump claims the U.S. needs to take control of Greenland to protect U.S. national security: “The United States needs Greenland for the purpose of National Security. It is vital for the Golden Dome that we are building. NATO should be leading the way for us to get it. IF WE DON’T, RUSSIA OR CHINA WILL, AND THAT IS NOT GOING TO HAPPEN! Militarily, without the vast power of the United States… NATO would not be an effective force or deterrent – Not even close! They know that, and so do I. NATO becomes far more formidable and effective with Greenland in the hands of the UNITED STATES. Anything less than that is unacceptable…”(Source: Truth Social)

Recap

Inside The Buy-Side® Q4’25 Earnings Primer®

Following last quarter’s Survey which found increasing optimism but with tariff impacts and consumer concerns serving as offsets, the Voice of Investor® captured this quarter reveals a generally consistent outlook as we head into 2026. Interest rate cuts, earnings momentum, and productivity gains drive favorable views, but enthusiasm is tempered by frothy valuations, policy impact, geopolitics, and percolating AI bubble concerns.

Key Takeaways

  • Investor sentiment remains optimistic, ebbing only slightly, with expectations for strong Q4’25 revenue and earnings prints and 2026 guides; executive tone perceived as more upbeat QoQ
  • Focus on growth continues to outstrip that of margins, supported by AI, lower rates, and OBBBA benefits; still, concerns about fed policy, geopolitics, and tariff uncertainty serve as counterweights
  • Reinvestment catapults to the most preferred use of cash for the first time in a year; Financials and Healthcare surpass Tech as the most in-favor sectors, while India and China see more bullish views
Corbin Advisors Inside The Buy-Side® Earnings Primer® Q4'25 Cover

Earnings Primer®

Press Release

Quarterly Snapshot

The Sector Beat: U.S. Banks

U.S. banks are broadly constructive on the macroeconomic outlook entering 2026, citing resilient consumers, easing monetary policy, OBBBA impact, and sustained capital investment, particularly in technology, as key growth drivers, alongside broadening global growth opportunities, with Asia emerging as an increasingly important engine for capital markets activity and Europe showing early signs of stabilization. While management teams acknowledge lingering risks from geopolitics, policy uncertainty, and elevated global deficits, the prevailing tone is one of cautious optimism — in line with our findings from our Q4’25 Inside The Buy-Side® Earnings Primer®, which saw Financials catapult to the top of our Sector Bulls board.

Meanwhile, analysts are drilling deep into capital spending and investment cycles, pressing for visibility into capex timing and returns and how investment intensity translates into revenue opportunities across the cycle.

From an operating standpoint, banks continue to emphasize disciplined expense management while selectively reinvesting efficiency gains to support long-term growth.

In Q&A, expenses are a primary focus; analysts are focusing on specifics (timing and magnitude), what is discretionary vs. structural, and how banks plan to deliver operating leverage while continuing to invest. Management teams are highlighting how significant cost actions over the past several years are now enabling reinvestment in strategic priorities such as AI, digital infrastructure, and platform modernization to drive positive operating leverage.

Deal activity continues to be a notable bright spot. The current regulatory environment, reopening IPO markets, and greater confidence among CEOs and boards are driving a meaningful acceleration in M&A and capital markets pipelines heading into 2026, with global capital markets activity, particularly in Asia, providing incremental upside. Banks reported stronger fee momentum in the back half of the year, larger and more complex mandates, and a growing appetite for transformative transactions, tempered only by sensitivity to potential exogenous shocks that could disrupt sentiment.

Despite weak headline consumer sentiment, banks’ proprietary data points to a consumer that remains on solid footing. Stable spending, healthy account balances, improving credit metrics, and steady employment trends continue to support a constructive outlook for household demand and loan performance. Management teams emphasized that they are closely monitoring leading indicators but have not observed material deterioration in consumer behavior.

Separately, affordability has surfaced more explicitly in the policy dialogue: the prospect of a credit card rate cap proposed by the U.S. administration is appearing repeatedly in Q&A, with banks acknowledging consumer sensitivity and warning that broad caps could reduce access to credit and softer consumer spending. The ultimate impact remains highly dependent on policy design, and banks indicated an ongoing willingness to engage with policymakers to seek balanced solutions.

Key Themes

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Macroeconomic Outlook

Broadly Constructive on 2026 Growth Supported by Continued “Resilient” Consumer, Easing Monetary Policy, OBBBA Impact, and Robust Investments, While Remaining Cautious on Geopolitical Risks, Policy Uncertainty, and Rising Global Deficits (In Line with Our Q4’25 Earnings Primer®)

  • JPMorgan ($883.3B): “When you’re guessing what the macro environment is going to be, in 6-9 months, and even year, it’s pretty positive. Consumers have money, and there are still jobs, even though it’s weakened a little bit. There is a lot of stimulus coming from OBBBA. Deregulation is a plus in general, not just for banks, but banks will be able to redeploy capital. But the backdrop is also important and the timetables are different. Geopolitical is an enormous amount of risk, and a big matter that may or may not determine the dead economy. The deficits in the U.S. and around the world are quite large. We don’t know, and it will bite eventually because you can’t just keep on borrowing money endlessly.”
  • Bank of America ($417.2B): “When you go to our corporate commercial customers, the tariffs appeared to be manageable and deregulation kicked in, they had a pretty good year and good profits, including good credit quality and good movement activity as we move through the year as they participate in the world economy. Our team has the global growth rate for GDP at 3.4% in 2026 and the U.S. at 2.6%. Risk remains out there, but we’re encouraged and constructive on the year ahead.”
  • Citi ($210.6B): “The global economy has powered through many shocks over the past few years, creating optimism and confidence that economic growth is poised to continue. With inflation now at normal levels globally, almost every central bank is becoming more accommodating. And while the labor market in the U.S. has softened, capital investment remains strong, especially in tech. And it’s the combination of that capex, health of the consumer, the tax bill benefit from anticipated rate cuts that should be enough to sustain growth.”
  • Morgan Stanley ($290.5B): “The U.S. economy proved resilient as ever. As predicted, the capital markets are kicking in with well capitalized corporates, and higher end consumers driving the economy forward. 2026 starts with the tailwinds of constructive fiscal policy and easier monetary policy. As the arc of history resumes, geopolitics are front-and-center with a broadening set of opportunities and challenges.”
  • Goldman Sachs ($284.8B): “We see a highly constructive setup for 2026 as the improving investment banking environment and our deep client connectivity position us to capture significant opportunities across the entire firm. At the same time, we remain mindful that the operating environment can shift quickly. Economic growth, policy uncertainty, geopolitical developments, and market volatility are factors we continue to monitor closely. And as always, disciplined risk management will remain central to how we serve clients and allocate resources.”

Banks Prioritize Disciplined Expense Control and Efficiency Gains While Reinvesting Savings, to Drive Operating Leverage and Sustainable Revenue Growth; Analysts Press Hard During Q&A, Including on AI

  • JPMorgan ($801.1B): “We’re building more AI systems. We’re connecting more branches, which means you have the higher network expenses. But the tech spend is always one of the harder ones to measure and evaluate. We spend money on trading. We spend money on payments. We spend money on consumer. We spend money at asset management. We spend money in Corporate. We spend money. We need to have the best tech in the world. That drives investment. It drives margin. It drives competition.”
  • Citi ($210.6B): “We will continue to invest in our businesses to support continued top-line revenue growth and expect higher volume and other revenue-related expenses with capacity generated from productivity savings from our prior investments, reduction of transformation expenses, continued reduction in stranded costs as well as a lower level of severance versus 2025. We expect another year of positive operating leverage.”
  • Wells Fargo ($293.7B): “We’ve cut $15B of expenses out of the company. A couple of years ago, we had increased our regulatory expenses by $2B to $2.5B on an annual basis, and our expenses have come down. That is a significant amount of money that we’ve been able to use to reinvest to position ourselves for growth [especially with AI]. And we’re going to continue to figure out what we think the right trade-off is to reinvest those savings into driving growth inside the company as we’ve done in the past. But as we think about what we’ve done to be able to increase the returns of the company, it is either – what we’ve done is we’ve reduced the expense base of the company while we’ve grown revenues.”
  • Bank of America ($336.4B): “We’ve driven the efficiency down, we expect to continue to drive it down. It is all going to be due to headcount because that’s 60%+ of our expenses. We’ve absorbed inflation. Focus on the operating leverage in the company, because at the end of the day, we’ve got to grow revenue at a faster rate than expenses for operating leverage. We produced that for our last five quarters. We had five years of it leading up to the pandemic. But the reason why they want us to focus on that is to get away from the nominal dollar debate every quarter and get more focused on how the team’s doing a great job of driving the revenue and driving the expense. If the revenue growth slows down because of the dynamics outside our company, the expense growth will slow down.”
  • United Community Banks ($3.6B): “We’re really trying to stick to this 3% and 3.5% [expense] growth rates. We are budgeting for operating leverage improvement in 2026. We see that with on the revenue side, with our expectation for solid loan growth, a little bit of margin expansion in combination with expenses being managed.“
  • First Horizon ($10.8B): “We start with a base case of expenses being in line with inflation. You have wage inflation, you have contract inflation, so we start with that. And then…we did have some things that were multi-year investments [tech / digital infrastructure investment] that are running down. But think about our normal growth in that inflationary area, which would be 2.5% to 3% currently.“
  • Sell Side: “I think the communication on efficiency and expenses is a big part of what’s holding down the stock. What should we take away in terms of the expense messaging? Is it…that the head count needs time to work through? Is there more investment spend you wanted to front load in a great revenue year. What exactly do you want your investors to take away in terms of how you’re viewing the expense growth relative to the revenue side?”
  • Sell Side: “On AI investments, how much do you spend on that or the number of people, if you could dimension that and what kind of outcomes you’re looking for, especially as we sit here at the start of the year?”

Significant Upswing Expected to Continue Amid the Current Regulatory Environment; IPO Market Anticipated to Pick Up Steam

  • Bank of America ($417.2B): “We feel good about the deal environment. Investment banking fees were 25% higher [in 2H25 than in 1H25], and that’s largely based on more certainty around tax and trade and some of the things that really matter to CEOs and CFOs and Boards of Directors. We feel good about the investment banking environment.“
  • Wells Fargo ($298.1B): “In M&A, we’re winning increasingly bigger and more complex assignments. We entered 2026 with our deal pipeline meaningfully greater than it has been at any point in the last five years, although market conditions can always change.”
  • Morgan Stanley ($290.5B): “Looking ahead to 2026, investment banking pipelines remain healthy, global and diversified across sectors. Strategic activity is accelerating.Companies and sponsors are looking to access capital for growth, investments, and the reopening of the IPO market creates additional opportunities.”
  • Goldman Sachs ($284.8B): “We had a very different environment from regulatory perspective for M&A for the last four years. That doesn’t mean that it’s a blank check, no regulatory oversight of large scale consolidation. But CEOs definitely believe that the art of the deal and scaled consolidation is possible now. So CEOs and boards are looking and saying, ‘Okay, we’ve got a window here of a handful of years where the opportunity to consider big strategic transformative things is certainly possible’. And therefore, you’ve got a much, much more, front foot forward across industry group of CEOs really thinking about…Is there something we should dream about that really advances our competitive position?… I think that’s leading to a significant upswing in activity, provided we don’t have some sort of an exogenous event that changes the current sentiment that we now have.”

Overall Health Remains “Resilient” Despite Weaker Sentiment; Banks Cite Stable Spending, Balances, Employment, and Credit Trends as Supporting a Constructive Outlook for Growth into 2026

  • JPMorgan ($883.3B): “Consumers and small businesses remain resilient. We continue to monitor leading indicators for any signs of stress. And despite weak consumer sentiment, trends in our data are largely consistent with historical norms, and we are not currently seeing deterioration.”
  • Bank of America ($417.2B): “Consumer spending grew 5% over the 2024 levels at $4.5T. Account balances in the consumer business, that broad base of the U.S. consumer were stable through the year. Delinquencies and charge-offs improved in 2025 consumer credit. Unemployment in the market remains stable and the equity market appreciation benefits consumers or investors. This strong consumer health bodes well for a continued improvement in growth in 2026.”
  • Wells Fargo ($298.1B): “The economy and our customers remain resilient, but we continue to closely monitor our portfolios for signs of weakness. In addition to tracking credit metrics in our loan portfolios such as early-stage delinquencies, we also monitor consumer behavior more broadly to help us understand consumer health. For example, we look at things like checking accounts with unemployment flows, direct deposit amounts, overdraft activity and payment outflows, and we’ve not observed meaningful shifts in trends.”
  • First Horizon ($10.8B): “Customers are generally still pretty optimistic. We see it in our pipelines and the momentum in the economy appears to be very, very good today. As uncertainty emerges, whether it’d be Venezuela or Iran or oil prices or whatever the uncertainty could possibly be, people take stock, but I think people are generally biased for growth.”

Broad Opposition Across Banks — While Affordability Matters, Price Controls Risk Unintended Consequences; Outcomes Highly Dependent on Policy

  • Citi ($210.6B): “A rate cap is not something that we can support, the impact to us and other banks would be dwarfed by the severe impact on access to credit and on consumer spending across the country. These things don’t work out as intended. When the Carter administration put credit controls in place to reduce costs, the impact was so severe they were very swiftly rescinded within two months.”
  • JPMorgan ($883.3B): “It should be obvious that [ the rate cap] would also be bad for us…this is a big business for us, and we wouldn’t be in it if it weren’t a good business. In a world where price controls make it no longer a good business, that would present a significant challenge. Beyond that, the way we actually respond would have a lot to do with the details, and I don’t think we have enough information at this point.”
  • Bank of America ($417.2B): “We believe in affordability, but with instruments that cap, you will see unintended consequence of that, and I think that’s what you’re seeing a debate going on as people are making our points to the various – the administration and Congress and others involved.”
  • Wells Fargo ($298.1B): “We all agree that the underlying issue of focusing on affordability is a real issue and it is something that should be carefully considered. It’s too early to know because we’re not quite sure what the ultimate actions the administration or Congress choose to go down, and that’s something we hope to engage in. We’re very much aligned with trying to find solutions and just do it in a way that doesn’t have adverse impact.”

Opportunities are Broadening Beyond the U.S., with Asia — Particularly Hong Kong, Japan, India, and Southeast Asia — Emerging as Key Engines of Capital Markets Activity; Europe Shows Early Signs of Recovery Amid Policy Support

  • Citigroup ($210.6B): “China is relying on exports to grow and compensate for slower domestic consumer demand. And Europe has taken some steps to accelerate its anemic growth, and we’re hopeful that Germany can create a meaningful stimulus.”
  • Bank of New York Mellon ($84.1B): “The U.S. is the biggest market that we operate in, ~40% is outside of the U.S.We feel like we’ve got a good global balance, but the U.S. obviously has got a lot of opportunity for us and a lot of our platforms have seen the growth. But last year, the fastest-growing, in percentage terms, region was Asia. So, clearly there’s opportunity there as well. Historically in Europe, we might have been a little bit under penetrated so that there’s real opportunity there as well.”
  • Morgan Stanley ($290.5B): “25% of our revenues this year came from outside the U.S., with EMEA growing revenues by 40%, and Asia by 50% over the last two years. We have leading businesses in Japan, thanks to our almost 20-year joint ventures with our close partner MUFG, and a world-class business in Hong Kong. We’ve grown in the EU and maintained leadership in the UK…The reality is the equitization of markets around the world is underway. Hong Kong was the busiest issuer of equity in the world over the last year. That will continue. And of course, we have the sweet spot in the U.S.“
  • Bank of America ($417.2B): “Q4 Global Markets revenue grew 10% YoY, driven by strong sales and trading performance. And it was equities trading that led the improvement, growing 23%, supported by increased activity in Asia. We’re covering newer and emerging companies in things like technology and healthcare in a different way, earlier in their lifecycle, and we’re covering more clients internationally. “
  • BlackRock Inc ($169.0B): “Asia capital markets grew faster than the US capital markets. More IPOs in Asia, especially in Hong Kong. You’re seeing historical changes in Japan because the NISA accounts and retirement accounts, you’re seeing more of wealth entering the capital markets out of the banking system, and that represents more and more opportunities. Japan has been an exceptional platform for growth. The wealth that is being generated in Southeast Asia [like Hong Kong and Singapore] all leads to bigger opportunities, not just bigger opportunities to manage the money, but bigger opportunities to invest like GIP invested in the airports of Malaysia. We believe that the transmission of the growth of the capital markets in India is just at the very beginning. Historically, Indians kept most of their money either in gold or in cash. And I think the opportunity to develop a self-directed retirement platform in India is real.”

In Closing

Overall, U.S. banks are entering 2026 with multiple tailwinds, including constructive macro conditions, a healthier capital markets backdrop, broadening global growth opportunities, and a consumer that continues to hold up better than sentiment implies, though this is largely being driven by the top of the K cohort. Management commentary reinforces that the operating environment is improving, while remaining clear-eyed and transparent about the risks and variables they cannot control.

Geopolitical uncertainty, policy outcomes (including regulatory and affordability-related initiatives), and the potential for exogenous shocks remain key swing factors that could alter momentum. As a result, investors and analysts are increasingly focused on institutions that can balance growth and efficiency, capitalize on the reopening of global capital markets, and navigate regulatory and macro crosscurrents with discipline.

Up next week: Industrial Sector Beat

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