The U.S. stock market is expected to kick off the third quarter earnings season with a strong start. The revival of investment banking is expected to boost the strong growth of the six major banks' performance.

The new round of earnings season for US stocks will kick off next week. Leading the pack are six major US banks - JPMorgan Chase (JPM.US), Goldman Sachs Group, Inc. (GS.US), Morgan Stanley (MS.US), Bank of America Corp (BAC.US), Citigroup (C.US), and Wells Fargo & Company (WFC.US) - which will start releasing their third-quarter earnings from next Tuesday. The market currently expects that due to the strong recovery in investment banking business, combined with the resilience of the US economy keeping borrowers in good standing and supporting consumer and commercial lending sectors, the third-quarter earnings of these six major banks will be strong. At the same time, investors will closely monitor the economic outlook of these banks, as well as expectations for investment banking and trading businesses. Mac Sykes, portfolio manager at Gabelli Funds, says, "The market will focus on any changes in the credit environment, the impact of employment data, and the overall economic outlook. Consumer confidence has fallen, and business confidence is still evolving. We will observe whether the market volatility earlier this year leaves hidden risks." Outlook for the six major banks' earnings Benefiting from strong investment banking business and market income, JPMorgan Chase is expected to see earnings per share grow by over 10% in the third quarter. The bank has previously stated that it expects investment banking revenue to grow in the low double digits in the third quarter. Bank of America Corp is expected to see a nearly 17% year-on-year growth in earnings per share for the third quarter. The bank's Chief Financial Officer Alastair Borthwick said in September that investment banking revenue in the third quarter is expected to grow by 10% to 15%. Analysts note that investors are focusing on the bank's stock buyback pace and capital management plans, with details possibly to be announced at an investor day in November. Citigroup's third-quarter earnings per share are expected to increase by 26% year-on-year, primarily driven by the capital markets business. Citigroup previously stated that its investment banking revenue and market revenue are expected to grow in the mid-single digits. Goldman Sachs Group, Inc. is expected to see a roughly 31% year-on-year increase in earnings per share for the third quarter, mainly due to the rebound in investment banking and trading departments. The market will be watching to see if this growth is sustainable. Morgan Stanley's earnings per share for the third quarter are expected to grow by over 11% year-on-year. Analysts point out, "With its comprehensive advantage in capital markets, wealth management, global footprint, and profitability, Morgan Stanley is expected to outperform its peers in mid-term revenue growth." Investors will also be focusing on Wells Fargo & Company's growth plans following the removal of a $1.95 trillion asset cap by regulatory agencies. Mergers and acquisitions activity picking up, as regulatory easing and rate cut expectations act as catalysts Investment banking activity was temporarily stalled earlier in the year due to President Trump's announcement of tariff measures. Now, it has regained momentum due to regulatory easing and expectations of further rate cuts by the Federal Reserve. JPMorgan Chase describes this summer as one of its "busiest merger seasons," with recruitment activity also on the rise. Data from Piper Sandler analysts shows that as of mid-September, 49 mergers were announced in the third quarter, higher than 39 in the second quarter and 32 in the same period last year. Global merger size has reached $2.6 trillion, the highest level since the pandemic peak in 2021. Mergers and acquisitions (M&A) and initial public offerings (IPOs) have fueled a surge in transaction activity, keeping the equity capital markets strong. However, some analysts remain cautious. Oppenheimer analyst Chris Kotowski wrote in a report, "Our view of the current merger cycle is that although 'this bird is flapping its wings,' it has not truly taken off." This contrasts sharply with the market's earlier expectation of an "epic wave of mergers" at the beginning of the year. Outlook for trading income and net interest income Bank of America Corp's trading income is also expected to grow. Jefferies Financial Group Inc. analysts stated, "Historically, the third quarter has been a slow season for trading businesses. But the third quarter of 2025 seems to break this trend." They point out that stock trading volume remains strong, while fixed income, currency, and commodity trading activities are also active. Investors will also focus on the outlook for net interest income (NII). Baird Equity Research analysts said that with the US economy remaining resilient, NII expectations may remain robust. Several major banks have stated that the financial condition of US consumers remains strong, with borrowers continuing to repay loans on time. Therefore, investors will be watching for any changes in delinquency rates or default rates. Brian Mulberry, portfolio manager at Zacks Investment Management, said, "While there are no significant concerns in investment banking and commercial banking at the moment, on the retail side, we see deposit levels and loan growth basically flatlining." He added, "Rising potential default risks for some small businesses have also raised new concerns." Morningstar analyst Suryansh Sharma said, "Banks hold a large amount of capital, and with the macroeconomic environment remaining stable, we will closely monitor whether management hints at a rebound in loan growth for the next few quarters."