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This Week in Earnings – Q1'26

The Sector Beat: U.S. Banks

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In today’s thought leadership, we’re covering:

Key Events

Iran War

  • Monday, the U.S. initiated a naval blockade of the Strait of Hormuz, targeting Iranian oil exports and shipping, aiming to constrain Iran’s revenue base and force concessions on its nuclear program. Iran condemned the move and threatened retaliation, contributing to an immediate spike in oil prices and disruption to global shipping flows. (Source: WSJ, Bloomberg, AP News)
  • By Tuesday, the strategy broadened into a more explicit campaign of economic isolation, with efforts to restrict Iran’s trade and energy exports following the breakdown of extended diplomatic talks. Iran rejected key U.S. demands, including limits on equipment and nuclear enrichment, while domestic economic pressures continued to build. (Source: WSJ, Bloomberg, AP News)
  • Friday morning, Iranian Foreign Minister Abbas Araghchi declared the Strait of Hormuz open, causing Brent futures to fall more than 10% on the news to $90 a barrel, and WTI to fall to $81.50 a barrel. Araghchi added: “In line with the ceasefire in Lebanon, the passage for all commercial vessels through the Strait of Hormuz is declared completely open for the remaining period of the ceasefire.” (Source: WSJ, Bloomberg, CNBC, Reuters)
  • Senior defense officials have confirmed they have approached automakers and other U.S.-based manufacturers to increase their role in military production. While the talks are preliminary, defense officials indicated that American manufacturers might be needed to backstop traditional defense companies as the wars in Ukraine and Iran deplete equipment and munitions stores. (Source: WSJ)

Banking Regulation

  • Last month, the Federal Reserve Board, the FDIC, and the OCC published proposed amendments aimed at modernizing the regulatory capital framework for banks of all sizes. The first proposal, which would primarily apply to the largest banks, is intended to improve the capital framework by enhancing risk sensitivity, reducing burden, improving consistency, and implementing the final components of the Basel III agreement. The second proposal, which would generally apply to all but the largest banks, would better align capital requirements for traditional lending activities with risk, while maintaining the framework’s simplicity. The third proposal would improve the measurement of systemic risk in the framework for determining the additional capital requirement for the largest and most complex banks. (Source: The Federal Reserve)
  • U.S. Treasury Secretary Scott Bessent confirmed during the Invest in America conference this week that an executive order requiring banks to request citizenship documentation is forthcoming. The proposed rule change will update existing requirements established under the BSA (Bank Secrecy Act). Banks have pushed back on the rule change, citing increased regulatory burden. Center-right think tank American Action Forum estimated that this proposed change would add anywhere from 30 million to 70 million paperwork hours and $2.6 billion to $5.6 billion in costs. (Source: CNBC)

U.S. Economic Data

  • The U.S. Consumer Price Index for March increased 0.9% MoM, accelerating the YoY rate to 3.3%, while core CPI rose a more moderate 0.2% MoM and 2.6% YoY. The headline increase was driven primarily by energy, particularly gasoline, while underlying categories remained relatively contained, reinforcing that the reacceleration in inflation was concentrated rather than broad-based. (Source: BLS)
  • The U.S. Producer Price Index for March rose 0.5% MoM, below expectations, with core PPI increasing just 0.1% MoM, bringing the YoY rate to ~4.0%. The monthly increase was modest across final demand categories, pointing to pipeline inflation pressures that remain subdued and suggest limited near-term pass-through into core consumer inflation. (Source: BLS)
  • Initial Jobless Claims declined to ~207K from ~218K prior, remaining near cycle lows. The data continues to reflect a tight and stable labor market, with no meaningful signs of deterioration in employment conditions. (Source: U.S. Department of Labor)
  • Industrial Production for March declined 0.5% MoM, missing expectations, with weakness concentrated in manufacturing output. The decline highlights that hard activity data remains uneven, even as survey-based indicators point to improving forward momentum. (Source: The Federal Reserve)
  • The preliminary University of Michigan Consumer Sentiment Index for April fell sharply to 6, down from 53.3 in March, marking a ~10–11% MoM decline and the lowest level on record in the survey’s ~70+ year history. The deterioration was broad-based across all components, with the current conditions index falling to 50.1 (from 55.8) and the expectations index dropping to 46.1 (from 51.7), indicating that both present conditions and the forward outlook are weakening materially. (Source: The University of Michigan Survey Research Center)

Recap

Inside The Buy-Side® Q1’26 Earnings Primer®

Following last quarter’s Survey, which found resilient optimism buoyed by lower interest rate expectations, growth resilience, OBBBA benefits, and AI-driven productivity gains somewhat tempered by concerns about frothy valuations, policy impact, and geopolitics, the Voice of Investor® captured this quarter reveals a sharp reversal in positive sentiment amid Iran War fallout, largely higher inflation and further pressure on the consumer.  

  • Investor optimism calibrated for Black Swan-induced uncertainty; notably, bearishness remains below post-tariff announcement levels
  • 4x increase in investors expecting consensus misses is registered, though companies are largely anticipated to maintain 2026 guidance
  • After increasing focus on growth in prior surveys, investors prioritize margins with concerns about compounding inflation spiking
  • Despite elevated uncertainty, investors continue to cite reinvestment as the top preferred use of cash, followed by debt paydown
Corbin Advisors Inside The Buy-Side® Earnings Primer® Q1'26 Cover

Earnings Primer®

Press Release

Quarterly Snapshot

The Sector Beat: U.S. Banks

U.S. Banks kicked off Q1’26 earnings season with broadly constructive sentiment, albeit tempered by a conservative tone regarding the full-year path ahead. Management’s description of the operating environment is “resilient but fragile,” with a generally healthy consumer despite the bottom part of the K absorbing more pressure, which we covered in our Q1’26 Inside The Buy-Side® Earnings Primer®.

Across large money-center banks and capital-markets-heavy firms, Q1 execution was strong. Trading, advisory, wealth / asset flows, and fee business all performed well, while changes in credit quality proved to be benign. Messaging around private credit suggests that traditional lending institutions view the risk as manageable and not systemic, as whispers of potential contagion led concerns heading into the prints.

Domestically, companies messaged that business activity remains healthy enough to support loan growth, consumer spending, and a robust IPO pipeline. The global message, meanwhile, was more reserved, with many of the largest banks reporting that the path forward remains beholden to the ongoing Iran War and its subsequent impacts.

Meanwhile, investments in and application of AI continue to be a central theme across earnings calls. Framing has pivoted from simple “experimentation” to detailed articulation of the operating infrastructure, workflow redesign, client impact, and cybersecurity applications. Several companies mentioned being granted access to the “Claude Mythos Preview” to assess existing defenses and model-driven cyber risk.

Executive commentary on the IPO landscape was “selectively sanguine”, noting that while there is a strong pipeline of large deals, activity slowed in March due to volatile equity markets. Management teams framed this slowing as an event-induced delay, rather than a cancellation of fundraising. Despite this pause, yesterday was marked by two major Industrial IPOs, with one being the largest industrial launch (and a valued Corbin client) since UPS went public in 1999, giving the market optimism for the remainder of the year.

During Q&A, analysts focused on the durability of Q1 results. Thematically, the Street was keen to better understand:

  1. The sustainability of investment banking and capital markets momentum
  2. Whether higher energy prices are starting to hit the consumer
  3. Exposure to private credit and nonbank financial exposure
  4. NII and deposit trajectory
  5. AI investment and application, especially given Anthropic’s Mythos release

Many of the largest banks also weighed in on the proposed regulatory changes aimed at modernizing rules governing risk-based capital. The changes have been met positively by management teams, with commentary signaling encouragement over the direction of travel while noting there is room for further improvement.

Key Themes

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Consumer Outlook

Resilient but Fragile and Increasingly Bifurcated; Companies See a Strong Economy and “Resilient” Consumer Despite Recent Energy Price Shocks; Bottom-of-the-K Sees Continued Pressure

  • Wells Fargo ($250.4B): “Despite slowing employment momentum, U.S. economic growth has held up.The U.S. consumer remains resilient in the aggregate but increasingly bifurcated beneath the surface. Spending has held up into early 2026 despite slower job growth supported by higher-income households, steady wage growth for incumbent workers, and continued access to credit. However, confidence indicators and underlying balance sheet trends point to rising stress for less affluent consumers. Upper-income consumers continued to benefit from elevated equity prices, home equity, and cash buffers accumulated earlier in the cycle, allowing discretionary spending to remain firm. In contrast, lower-income households are more exposed to higher interest rates and energy prices.”
  • M&T Bank ($32.9B): “The economy continues to hold up well despite the ongoing concerns and uncertainty regarding tariffs and other policies. The situation in Iran poses new risks to the U.S. and global economies through energy prices and uncertainty.Consumer spending has slowed but continues to grow in aggregate. However, there is a growing divide between higher- and lower-income households, often called the K-shaped economy. The higher-end consumer continues to be stronger and is spending, while the lower-end consumer has not declined but has maintained, and is vulnerable to environmental risks. Encouragingly, the underlying details for Q1 show continued strength in equipment and investment by firms.”
  • Morgan Stanley ($289.9B): “We remain mindful of the known unknowns of 2026, the accelerating adoption of AI at the enterprise level, and the ongoing military conflict in the Middle East. Against this backdrop, our approach is one of measured confidence. Our institutional wealth clients demonstrate continued resilience and, as much as ever, seek the depth and breadth of content and market access that Morgan Stanley provides. At the same time, we remain vigilant in the context of higher asset prices, tight credit spreads, and interest rate path uncertainty.”
  • BlackRock ($159.1B): “Q1 2026 unfolded in a more volatile market environment. Markets showed heightened sensitivity to incremental economic data, with volatility rising across rates, equities, and currencies. There is real, impactful geopolitical uncertainty. There’s both excitement and anxiety about how AI will impact day-to-day lives and business models. As capital reallocates and assumptions are challenged, markets can feel unsettled even when underlying fundamentals are sound. That dynamic is evident today.”
  • JPMorgan Chase ($833.6B): “I struggle to say something new and interesting every quarter. There is nothing new or interesting to say this quarter. We’ve looked at it from every angle: early roll rates, delinquency rates, cash buffer, spend, discretionary spend, and non-discretionary spend. It all looks consistent with prior trends and fundamentally healthy. Gas or energy costs are about 3% of the typical consumer’s expenditure, at least in our portfolio. So, it’s not nothing, but it’s not overwhelming. We’ve looked to see if there’s…evidence in there of people trading, decreasing other discretionary spending to adjust for higher gas prices. But it’s just kind of not enough yet to be visible.”

Banks Frame Investment in AI Tools and Infrastructure as Key Expense Management Levers; Trajectory of AI Spend Remains Up and to the Right While Headcount Discussions Focused on AI-Driven Reductions

  • PNC Financial Services ($89.6B): “We remain focused on expense management, and as we’ve previously stated, we have a goal to reduce costs by $350M in 2026 through our continuous improvement program, which is independent of the FirstBank acquisition. And this program will continue to fund a significant portion of our ongoing business and technology investments.”
  • Bank of America ($381.2B): “Expense discipline is embedded in how we run our company. In Q1, our expenses reflected the choices we made. First, we continue to invest in our revenue-producing capabilities, whether it’s relationship managers and all the businesses, new branches, technology of all types delivered throughout the platform, and product enhancements of all types. The second thing we do is we continue to offset those investments through productivity and simplification. The continued digitization of our clients’ activities within our company, the application of AI, and detailed process reengineering all help reduce manual work, lower unit costs, and limit increases in our base cost structure. Third, we remained highly disciplined in non-strategic spend. We are mindful not to add layers of complexity or fixed costs that don’t support our clients and their needs. That discipline is part of our responsible growth culture, which has been going on for many years. If you think about that in terms of headcount, we are down about 1,070 people from YE25 through attrition, and we’ll continue to drive that.”
  • Citigroup ($215.4B): “We have spoken about it throughout the year; you would expect us to be coming down on headcount. Not only do we expect to drive expense discipline in the day-to-day, but we are also focused on structural efficiencies over time.And what that means is both benefiting from the investments we’ve already made in our transformation where you saw us modernizing a lot of our platforms, but also what we have ahead of us in terms of continuing to drive with the support of technology automation in our processes, further automation, as well as leveraging AI to give us further opportunities to turbocharge those investments that we want to make in a self-funded way.”
  • Wells Fargo ($265.5B): “While expenses increased, driven by higher revenue-related expenses, we remain focused on expense discipline. At the same time, we’re increasing our investments in areas like technology, including AI, as well as in advertising, while continuing to execute on our efficiency initiatives, which have resulted in 23 consecutive quarters of headcount reductions.”

Banks See Weakness in Private Credit as Ripples in a Pond, Not Waves in an Ocean; Commentary Frames Private Credit as Future Credit-Cycle Event and Not Current Systemic Problem

  • JPMorgan Chase ($833.6B): “There’s been some weakening in underwriting, and not just by private credit, elsewhere. There will be a credit cycle one day, and when there is, losses will be worse than people expect relative to the scenario. I don’t think it’s systemic. It almost can’t be systemic at that size relative to anything else. When recessions happen, and values go down, and people refinance at higher rates, there’ll be stress and strain in the system. And are people prepared for that?”
  • Goldman Sachs ($268.3B): “I know the media headlines have driven an enormous amount of negative sentiment around private credit. My own view is that it’s important to distinguish between different markets and put them all in perspective. Private credit, by the broadest definition you could possibly come up with, is about $3.5T in assets. But the thing that’s been getting a lot of focus is direct lending, which is about $1.6T to $1.7T in assets, of which the retail channel for that direct lending business is about 20%, or about $230B of NAV. There are obviously heightened redemptions in certain peer-managed funds. These peer-managed funds have been concentrated in retail outflows rather than institutional outflows. One of the things we’re seeing that’s both interesting and quite constructive for our business is that spreads are becoming more lender-friendly.”
  • Morgan Stanley ($289.9B): “As you know, private credit as a sub-asset class has come of age over the last number of years as a new set of lenders has stepped in post the financial crisis in the place of Wall Street. While it’s still a growing class, it’s having a learning moment. We call it an adolescent moment, when both lenders and borrowers are being looked at carefully. But the reality is, it’s credit, and credit is going to perform when the economy is in the kind of good shape it’s in right now. And the fact that it’s called private credit has sort of taken on a life of its own for a while. But now we’re all seeing that there’s resilience in the underlying product, and that the structures and terms on the collateral are very well thought through. And that this is a market that over the long term has extraordinary growth potential, it’s just a question of time and working through economic cycles.”
  • BlackRock ($159.1B): “There’s been a lot of attention on private credit, but the headlines do not reflect what clients are telling us, what our portfolio data shows, or where we see the market going. Demand is structural, and private credit serves an important role in the financing ecosystems. Banks, governments, and public capital markets cannot fully address the world’s growth and investment capital needs. That isn’t changing.”

Cybersecurity Center Stage Again as Emergence of Claude Mythos Promises to Expand Cyber Attack Vectors; Companies Granted Preview to Bolster Existing Defenses

  • Goldman Sachs ($268.3B): “Cybersecurity has long been at the core of our business, and we have for a very, very long time invested enormous resources forward to think constantly about cybersecurity risk in our business, and it’s something we’ve invested significantly in and continue to invest in. And it’s been widely reported that the large bank CEOs happen to be in Washington for a regular meeting in the Financial Services Forum. It’s something we’re focused on, and there’s nothing new in that focus. Obviously, LLMs are making rapid progress, and we’re hyper-aware of their enhanced capabilities. With the help of the U.S. government and the model publishers, we are very focused on supplementing our cyber and infrastructure resilience, and this is part of our ongoing capabilities that we have been investing in, and are accelerating our investments. As technology evolves, we have to continue to upgrade for cyber risk and make sure we’re at the forefront of that.”
  • JPMorgan Chase ($833.6B): “We’ve been talking about cyber risk for a long time. In fact, I said in the Chairman’s letter it is our largest risk. Every industry is different. In context, I think JPM is very well protected. We spend a lot of money. We’ve got top experts. We’re in constant contact with the government. We’re constantly updating things, but AI has made it worse. It’s made it harder. Of course, we read about Mythos, which we’re testing now, and looking at it, it does create additional vulnerabilities. Maybe down the road, better ways to strengthen itself too, but the side risk isn’t isolated to banks, and you can look at almost any industry. Also, banks are attached to exchanges and other things that create additional layers of risk, which we work with many people to protect against. So, it is a complex one. It’s a full-time job, and we’re doing it all the time. While we’re trying to get the benefits of AI, we are also very cognizant of the risk of cyber.”
  • Bank of America ($381.2B): “We’ve applied it and will continue to apply it. Our team’s job, and we’ve got catalyst efforts going on a corporate-wide basis to bring all the ideas to bear. Our team’s job is to benefit from the technology. It creates issues about cybersecurity and things like that, that you’re reading about in the paper, and we take those extremely seriously and invest heavily to do it and work with our industry colleagues and colleagues in other industries to ensure the safety and security of our architecture.”
  • Morgan Stanley ($289.9B): “Cyber resiliency has been a top priority at this firm and other firms…the reality is that cyber risk is in the ecosystem, an increasing threat broadly. This is another step in the long tail technology transformation that we’ve been talking about that is once in a generation, and now it’s here.”

Robust IPO Pipeline Building Despite Late Q1 Volatility Delaying Some Issuance; M&A Continues to Catch a Bid Signaling Continued Appetite for Capital Investment

  • Bank of America ($381.2B): “What we’re seeing is improved breadth in our Global businesses, not just episodic activity. Trading has benefited from volatility. In fact, this is the 15th quarter we have YoY revenue growth. But more importantly, investment banking pipelines are building, and engagement is up across all products. The tone of our corporate clients is strong.While they wonder about…things, they continue to conduct strong activities. That activity is healthier than a year ago and supports a continued constructive fee environment. In our view, while those risks are out there, the macro backdrop remains constructive.”
  • Citigroup ($222.2B): “The engagement with clients in Q1 has been very robust. When you look at the M&A pipeline, it remains quite strong, and we see good dialogue. We engage with global multinational corporations that have the resilience and strength of a strong balance sheet. We’ve seen good engagement and activity in the pipeline in front of us. Of course, if the conflicts were protracted and deeper over a longer period of time, that may start introducing some risk of deferrals and things like that into the second half of the year.”
  • Wells Fargo ($250.4B): “We still expect that the financing markets are sort of wide open still.We expect to see a lot of activity on the debt side, both in investment-grade and leveraged finance. And so, there’s plenty of money on the sidelines to sort of be put to work there. And that’s certainly been the case for a while. On the equity capital market side, you’ve certainly seen some delay in IPO activity in the latter part of Q1. Assuming some of the volatility subsides or stabilizes, you may see some of that start to come back. There’s certainly a pipeline of companies waiting to go. And then, in the meantime, you’ve definitely seen a lot of activity on the convert side and in other parts of the ECM wallet. Overall, the pipeline and the expectation are still to see a pretty active rest of the year.”
  • Goldman Sachs ($268.3B): “We continue to see significant activity on the M&A front. Unless the overall environment gets much, much worse, I don’t see that slowing based on what we see at the moment. That said, there is no question that IPO activity slowed slightly amid the conflict in the Middle East, particularly in March. I do think there’s a very full pipeline. At the end of the day, equity markets have been extremely resilient, and if that resilience continues, I do think you’ll see IPO activity accelerate again. There are some very large IPOs that are lined up, and my expectation is that a number of them are going to come because it’s important for those businesses and for the capital formation around those businesses for that to happen, and they are also less sensitive to kind of short-term geopolitical trends.”
  • Morgan Stanley ($289.9B): “Building on the momentum in the back half of last year, M&A activity broadened across sectors with notable strength in technology and industrials. Equity underwriting revenues were solid at $396M, driven by higher issuance across IPOs and convertibles than the prior year. Fixed income underwriting revenues were $ Outperformance was driven by record issuance in the investment-grade market, supported by higher event-driven activity. Looking ahead to the remainder of the year, investment banking pipelines remain steady, supported by ongoing strategic activity from both corporates and sponsors and increasing needs for strategic capital formation.”

Sizeable Geopolitical Discount in Effect but Business as Usual; Oil Exporters Seen as More Insulated from Current Conflict

  • Citigroup ($215.4B): “The global macro economy to date has weathered shock after shock. However, the impact of the Middle East conflict is hitting Asia and Europe harder than countries such as the U.S. and Brazil, which are more insulated from energy shocks. Clearly, the longer this goes on, the more pronounced the second or third-order impacts are going to be around the world, and inflation is now a greater risk to growth and will likely cause central banks to lean towards more restrictive monetary policies.”
  • BlackRock ($159.1B): “Specifically in the Middle East, we have not seen any change in behavior. At this moment, we have not seen any withdrawals from sovereign funds to the treasuries of these countries. If anything, I think the money is still continuing to flow into their own individual sovereign funds. In some places…the increase in energy costs is being absorbed by governments. That’s happening in parts of Europe already and also in Asia. All that means is the deficits are likely to increase as they build out infrastructure. And so I would argue, this all presents bigger and better opportunities across the board.”

In Closing

Overall, despite generalist investor concerns with the consumer and impacts of the Iran War, U.S. Banks exited Q1’26 from a position of relative strength, supported by healthy core activity, a more constructive capital markets backdrop, and a consumer that remains broadly resilient, even as pressure continues to depress the Bottom-of-the-K.

Management commentary reinforces that the operating environment is improving over quarter lows, driven by the Iran War malaise, while remaining measured and transparent about the external risks that could affect full-year guidance.

Amid today’s positive developments, the reporting week ahead will be an interesting one.

Up next week: Industrial Sector Beat

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