This Week in Earnings – Q1'26

U.S. Banks in our Sector Beat

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; and 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 from our analysis:

• 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
• Investments and Expenses – 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
• Private Credit – 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
• AI and Cybersecurity – Cybersecurity Center Stage Again as Emergence of Claude Mythos Promises to Expand Cyber Attack Vectors; Companies Granted
• Deal Environment – Robust IPO Pipeline Building Despite Late Q1 Volatility Delaying Some Issuance; M&A Continues to Catch a Bid Signaling Continued
• Global Growth – Sizeable Geopolitical Discount in Effect but Business as Usual; Oil Exporters Seen as More Insulated from Current Conflict