Banks Deliver Surprise Growth While Navigating Iran War Fallout and Private Credit Risk

Wall Street’s chaos is turning into banks’ cash machine. Despite a “wall of worry,” the largest lenders delivered stronger-than-expected Q1 profits, driven by a surge in trading activity and a pickup in dealmaking.

Volatility pays: The first quarter of 2026 threw everything at banks — and they still came out ahead. The KBW Nasdaq Bank Index fell 6% in its worst quarter since 2023 as geopolitical tensions and credit fears rattled markets, but volatility turned into a tailwind. Trading desks thrived as clients repositioned and hedged, lifting results across the board — JPMorganJPM

saw profits rise 13% with markets revenue up 20%, while Goldman SachsGS

posted $17.23B in revenue with record equities trading. A rebound in dealmaking added another boost, as companies cautiously returned to the table despite the noise.

• CitigroupC
  was the standout, posting $24.63B in revenue — its best in a decade — with the bank’s return on tangible common equity rising to 13.1% as its turnaround gains traction.
• Wells FargoWFC
  lagged, missing across key income streams as net interest margin narrowed to 2.47%, with management warning of further margin pressure in Q2.

The Private Credit Elephant

Beyond the quarterly results, investors zeroed in on banks’ exposure to private credit, a less transparent corner of the market now showing signs of stress. JPMorgan CEO Jamie Dimon acknowledged “some weakening in underwriting,” but framed it as more of a headline risk than a fundamental threat. Still, as Morgan Stanley analyst Manan Gosalia warns, the tone remains cautious, with credit holding up for now but vulnerable if oil prices stay higher for longer.

• JPMorgan disclosed $50B in private credit exposure within its $160B+ NBFI lending, while Wells Fargo has $36.2B tied to private credit out of a $210.2B book.
• Risks remain as AI disruption pressures software borrowers and middle-market loan quality weakens, raising concerns of potential spillover into the broader financial system.

Verdict says: Even as banks posted strong results, executives struck a cautious tone. JPMorgan CEO Jamie Dimon warned of “an increasingly complex set of risks,” while Goldman’s David Solomon said volatility has picked up and a prolonged Iran conflict could weigh on dealmaking in the coming quarters. The quarter came through stronger than expected, but with elevated oil prices, pressure in private credit, and rising geopolitical tensions, the overhang of risks is far from fading.