NII repair cycle heads straight to 2027. Leading Wall Street giants taking the lead in the financial reporting season will add fuel to the bull market in US stocks.

As Wall Street giants are about to kick off the earnings season for US stocks, Goldman Sachs Group, Inc. released a research report stating that the outlook for Bank of America Corp's stock sector in 2026 is "constructively positive". The report is optimistic about the upcoming 4Q25 earnings season (the fourth quarter of 2025), expecting strong performance from Wall Street financial titans such as JPMorgan Chase and setting a solid foundation for the continued profit expansion trend and the bull market in US stocks in 2026. The analysts at Goldman Sachs Group, Inc. recommend investors to increase their holdings in large integrated bank stocks, such as Bank of America Corp (BAC.US), JPMorgan Chase (JPM.US), Citigroup Inc. (C.US), and others. The new round of US earnings season officially begins in mid-January, with Goldman Sachs Group, Inc., Morgan Stanley, and JPMorgan Chase and other Wall Street financial giants leading the way. The performance of these financial giants and their outlook for future performance will have a significant impact on the US stock market, and even the global stock market. The market is expecting Wall Street giants to kick off the earnings season with better-than-expected earnings growth and optimistic outlooks. Regarding the growth expectations for large Wall Street banks in 2026, the profit engines are still the NII recovery cycle and asset repricing. Goldman Sachs Group, Inc. points out that market consensus expectations may significantly underestimate the strong growth resilience of NII, investment banking, wealth management, and equity trading businesses. The Goldman Sachs Group, Inc.s investment strategy for bank stocks in 2026 focuses on "visible NII repair + fee resilience + positive operating leverage" for large Wall Street banks. Overall, Goldman Sachs Group, Inc. breaks down the main investment themes for the bank sector in the US stock market in 2026 into four categories: NII driving, investment banking/capital markets/risk asset optimization, capital reform and capital return schedule, and operating leverage. They believe these four themes collectively point to a more tradable fundamental and valuation upcycle for the Wall Street giants. Goldman Sachs Group, Inc. emphasizes that the NII "repair cycle" remains very strong and is expected to extend until 2027. Their specific methodology includes sensitivity analysis of short-term interest rate paths, deposit beta lags, and asset-side (especially securities portfolio) repricing. Goldman Sachs Group, Inc. predicts around +7% year-over-year core fee growth in 2026, with investment banking business, wealth and asset management, and card fees being the main contributors. In terms of operational leverage, Goldman Sachs Group, Inc. states that long-term and sustained positive operating leverage is a key source of "earnings certainty". They highlight the importance of scale, digital investments, and comprehensive cost control in maintaining positive operating leverage for the Wall Street giants. Goldman Sachs Group, Inc.'s preferred bank stock portfolio for 2026 includes Bank of America Corp (BAC.US), Citigroup (C.US), JPMorgan Chase (JPM.US), U.S. Bancorp (USB.US), and Wells Fargo & Company (WFC.US). Goldman Sachs Group, Inc. believes that these large bank stocks will benefit from a combination of continuously and significantly improving NII and operating leverage, asset repricing, strong capital adequacy, and strong ability to grow expenses, creating an 'industry growth tailwind' which is expected to act as a significant catalyst for the earnings season data (like 4Q25). In terms of valuation, Goldman Sachs Group, Inc. emphasizes that these preferred bank stocks' core valuation indicators such as P/B ratio are still at low levels, providing room for valuation recovery. Additionally, they believe that the interest rate decline trend under the Federal Reserve's rate cut cycle does not affect the profit margins of these large banks, mainly because the decline in liability costs is faster than the decline in asset returns. These banking giants have ample capital reserves and can significantly strengthen buybacks and dividend growth at a time when the Trump administration is easing regulatory policies. For example, at the level of excess capital optimization, current Wall Street banks have accumulated around $80 billion (5% of market value), which could increase substantially to $205 billion if regulations are relaxed (such as G-SIB buffer adjustments). In terms of buyback scale, Goldman Sachs Group, Inc. expects buyback + dividend return amounts to increase significantly to around $172 billion in 2026, indicating a potential 24% increase year-over-year and a return equivalent to 5.5% of market capitalization. Core data cited by Goldman Sachs Group, Inc. shows a dividend payout ratio of 110% in 2026, and a potential 5% increase in EPS if capital is fully used for buybacks. In terms of operating leverage, Goldman Sachs Group, Inc. states that long-term positive operating leverage is a key source of "earnings certainty". They straightforwardly indicate that in 2026, with net interest income (NII) growth of around 6%-9% offsetting operating expense growth of about +5%, large Wall Street banks generally have a positive operating leverage foundation. They emphasize the need for a comprehensive balance between scaling, digital investments, and cost control.