Wall Street’s Banking Giants Are Flying High This Earnings Season — But Turbulence Is Building

Banks are caught in an uncomfortable position — profiting handsomely from the very market conditions that could signal trouble ahead. America’s largest financial institutions just posted their strongest trading and dealmaking quarter in years, riding a wave of resurgent M&A activity and equity market euphoria to blow past Wall Street estimates. But beneath the celebration lies a darker reality — credit quality is starting to crack, and bank executives are sounding the alarm.

Blockbuster results: The third quarter marked a comeback for Wall Street’s core businesses, with global investment banking fees climbing to their highest level since 2021 as dealmakers capitalized on Trump-era deregulation. JPMorgan’sJPM

trading revenue jumped 25% to $8.94B, putting the firm on track for a record year, while investment banking fees surged 16%. CitigroupC

surpassed expectations, with total revenue rising 9% as markets, banking, services, wealth, and US retail units all posted record third-quarter performances. The rally extended to other banks as well:

• Goldman SachsGS
  saw investment banking revenue skyrocket 42%, driven by the busiest IPO quarter since 2021, while JPMorgan’s equity underwriting alone jumped 53%.
• Global investment banking fees reached $99.4B through the first nine months of 2025 — a four-year peak — fueled by Q3 megadeals totaling $1.26T.

Credit Quality Casts Shadow Over Global Markets

Despite crushing estimates, JPMorgan tumbled nearly 2% yesterday after adding $810M to its pile of reserves for potentially bad loans — more than analysts expected. The move follows two major auto bankruptcies, Tricolor Holdings and First Brands Group, which exposed hidden risks and alleged collateral fraud. First Brands alone revealed $800M in unsecured supply chain financing liabilities and allegations it pledged duplicate invoices to multiple lenders — sometimes triple-counting collateral — ensnaring JefferiesJEF

, UBSUBS

, and BlackRockBLK

for hundreds of millions each.

• JPMorgan took $567M in commercial charge-offs partly due to “borrower-related collateral irregularities,” with ~$170M linked to Tricolor.
• CEO Jamie Dimon warned, “When you see one cockroach, there are probably more,” and that “everyone should be forewarned on this one.”

Dangers of hidden risks: The International Monetary Fund warned that banks in the US and Europe have built up $4.5T in exposures to hedge funds, private credit groups, and other non-bank financial institutions. The IMF’s Tobias Adrian noted regulators have seen “an uptick in leverage in this sector and an uptick in the exposure of banks to non-banks,” raising concerns about hidden vulnerabilities that could amplify any market downturn. For now, banks are celebrating record hauls — while investors are left wondering when the bill comes due.