Major U.S. banks are expected to report higher profits for the first quarter of 2026, supported by a rebound in investment banking activity and resilient interest income, even as the Iran war injects uncertainty into the economic outlook. As reported by Reuters, the earnings season covering the quarter ending March 31 will begin with Goldman Sachs, followed by JPMorgan Chase, Wells Fargo, Citigroup, Bank of America, and Morgan Stanley, with investors closely watching both earnings performance and forward guidance.
Earnings Drivers: Deal Activity and Interest Income Lead Growth
Investment banking revenues are showing signs of recovery after a prolonged slowdown, with mergers and acquisitions (M&A) activity picking up during the quarter. Goldman Sachs ranked among the top global advisers for dealmaking, benefiting from a gradual normalization in corporate transactions.
At the same time, elevated interest rates continue to support profitability across the sector. Net interest income remains a key contributor, as banks benefit from higher lending margins, although the pace of growth is moderating compared to previous quarters.
Market Environment: Volatility Creates Both Risk and Opportunity
The first quarter has been characterized by heightened volatility across equities, commodities, and currencies, largely driven by geopolitical developments linked to the Iran conflict. Oil prices have fluctuated significantly rising above $100 per barrel during peak tensions while equity markets have experienced sharp swings.
This volatility has had a mixed impact on banks. While uncertainty can slow deal-making and lending activity, it also tends to boost trading revenues, particularly in fixed income, currencies, and commodities (FICC) divisions.
Geopolitical Impact: Iran War Clouds Outlook
The Iran war remains a central risk factor shaping bank outlooks. The conflict has increased inflationary pressure through higher energy prices and disrupted global market stability.
JPMorgan CEO Jamie Dimon has warned that war-driven inflation could keep interest rates elevated for longer, complicating the macroeconomic environment. Higher rates can support bank margins in the short term but may also weaken credit demand and increase default risks over time.
Loan Growth: Cautious Outlook Amid Uncertainty
Loan growth expectations remain subdued as businesses adopt a cautious stance amid geopolitical uncertainty. Corporate clients are delaying investment decisions, while consumers face higher borrowing costs.
Banks are expected to maintain tighter underwriting standards, reflecting concerns over credit quality, particularly in sectors exposed to energy price volatility and global trade disruptions.
Structural Dynamics: Diversification Supports Resilience
Large U.S. banks continue to demonstrate resilience due to diversified business models. Revenue streams from lending, trading, and advisory services provide a buffer against volatility in any single segment.
However, the current environment highlights increasing exposure to macroeconomic variables, including oil prices, inflation, and interest rate trajectories, all of which are being influenced by geopolitical developments.
Market Implications: Strong Earnings, Fragile Forward Outlook
While first-quarter earnings are expected to show improvement, the forward outlook remains uncertain. Investors are likely to focus on management commentary regarding:
- Interest rate expectations
- Credit quality trends
- Capital market activity
The Iran war introduces a layer of unpredictability that could impact performance in subsequent quarters.
Forward Outlook: Earnings Strength vs. Macro Uncertainty
Looking ahead, the performance of U.S. banks will depend on how geopolitical risks evolve and their impact on inflation, interest rates, and economic growth.
Key variables include oil price stability, central bank policy decisions, and the pace of recovery in capital markets activity. Until there is greater clarity, banks are likely to operate in a high-volatility environment.
Expert Insight
The current earnings cycle highlights a critical divergence as banks are delivering strong results today, but operating in an increasingly uncertain macro environment. Higher interest rates and improving deal activity are supporting profitability, but these gains are occurring alongside rising geopolitical risk and inflation uncertainty.
The key takeaway is that bank earnings are no longer purely cyclical as they are increasingly tied to global macro shocks. In this environment, performance will depend less on traditional growth drivers and more on how effectively institutions navigate volatility, manage risk, and adapt to rapidly shifting economic conditions.
Written by Shalin Soni, CMA specializing in financial analysis, global markets, and corporate strategy, with hands-on experience in financial planning and analytical decision-making.
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Disclaimer
This article is based on publicly available information, market developments, and credible media reports. The content is intended for informational and analytical purposes only and should not be considered financial, investment, or legal advice.