The U.S. banking industry entered the third quarter of 2026 with a supportive operating backdrop, characterized by healthy loan and deposit growth, resilient trading activity and improving dealmaking conditions. However, recent capital markets indicators suggest that the quarter may not be as strong as initially anticipated, particularly for banks with greater exposure to investment banking (IB) and trading.
According to a Yahoo Finance article citing Evercore’s August Capital Markets Monthly report, quarter-to-date industry indicators are tracking below expectations, suggesting that consensus estimates for third-quarter investment banking (IB) and trading revenues may be somewhat elevated. This could have varying implications for JPMorgan JPM, Bank of America BAC, Citigroup C, Goldman Sachs GS and Morgan Stanley MS, given the differing contributions of capital markets businesses to their overall revenues.
Banks with greater dependence on advisory, underwriting and institutional trading are likely to be more sensitive to any shortfall, while diversified institutions could receive greater support from lending, payments, wealth management and other recurring revenue streams. Consequently, third-quarter performance could vary meaningfully across the major U.S. banks despite a generally favorable industry backdrop.
Investment Banking & Trading Trends Remain Mixed
Capital markets trends have been mixed so far in the third quarter. IB volumes declined 6% year over year in July due to an 18% drop in debt capital markets and syndicated lending. However, strength in other areas remained encouraging, with equity capital markets volumes surging 119% and merger and acquisition (M&A) activity rising 11%.
Trading indicators have been relatively stronger. Within fixed income, currencies and commodities (FICC), foreign exchange trading volumes increased 17% year over year, commodities rose 17%, credit gained 10% and rates activity increased 2%. In equities, Chicago Board Options Exchange (CBOE) volumes declined 4%, but retail trading activity jumped 43%, options volumes increased 14% and average margin balances rose 32%.
Overall, strength in M&A, equity issuance and client trading activity should provide support to capital markets revenues. Nevertheless, weakness in debt issuance and elevated Street expectations could cap the upside. Hence, even solid year-over-year growth in IB and trading revenues may not be enough for some banks to meet consensus estimates.
How JPM, BAC, C, GS & MS Stack Up