This Week in Earnings – Q4'25

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®.

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.

Key Themes

• 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®)
• Investments and Expenses – 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
• Deal Activity – Significant Upswing Expected to Continue Amid the Current Regulatory Environment; IPO Market Anticipated to Pick Up Steam
• Consumer – 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
• Credit Card Rate Cap – Broad Opposition Across Banks — While Affordability Matters, Price Controls Risk Unintended Consequences; Outcomes Highly Dependent on Policy
• Global Growth – 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