13.10.2026 - Earnings Season: Banks Deliver Mixed Results
The US third-quarter earnings season has kicked off with four of the five major Wall Street banks reporting mixed results, highlighting diverging performance across the financial sector.
JPMorgan Chase disappointed investors, reporting earnings of USD 5.57 per share, below expectations of USD 5.85. This marked the bank's first earnings miss in nearly three years. While equity trading revenue surged 49%, weaker investment banking activity weighed on overall performance.
Goldman Sachs delivered significantly stronger results, with earnings of USD 17.01 per share, comfortably exceeding expectations of USD 12.86. Net profit reached USD 5.29 billion, demonstrating resilience despite the challenging financial environment.
Citigroup also exceeded expectations, reporting net profit of USD 5.2 billion, up from USD 3.8 billion a year earlier. Markets revenue increased 6% year-on-year, although trading activity slowed compared with the previous quarter.
Wells Fargo, meanwhile, reported earnings below market expectations, adding to the mixed picture emerging from the banking sector.
The results suggest that profitability remains relatively resilient, but performance is becoming increasingly uneven. Strong equity trading has helped offset weaker activity in other business segments, while elevated financing costs and economic uncertainty continue to create challenges.
Bank of America and Morgan Stanley are scheduled to report tomorrow, providing further insight into the strength of the US financial sector.
Markets:
Equities: show some weakness
Bonds: yields moving sideways - US 2y yield above 4.80%, US 10y yield above 5.22%, Japan 10y yield 3.00%
Commodities: Oil prices trading higher, WTI at USD 94/barrel and Brent around USD 106/barrel;
Precious metals moved lower, gold at USD 4’160/oz, silver below USD 60/ozCurrencies: US dollar almost unchanged - Japanese Yen slightly weaker USDJPY 159
Cryptos: rebound - Bitcoin around USD 83k
Volatility: The VIX index moving sideways, remains above 15 (good opportunity for hedging!)
My View: The first major earnings reports highlight an important divergence: Wall Street continues to benefit from strong financial market activity, while the underlying economic environment becomes increasingly challenging.
Strong trading revenues should not be mistaken for broad-based economic strength. Elevated bond yields, rising financing costs, weakening consumer sentiment and mounting credit risks continue to put pressure on the financial system.
The critical question is how long banks' loan portfolios can withstand persistently high interest rates and deteriorating economic conditions.
Delinquency rates have been rising steadily, with some segments of consumer credit approaching or reaching levels last seen around the Global Financial Crisis in 2008. This is an increasingly concerning signal that financial pressure on households is building beneath the surface.
Credit deterioration often materializes in bank earnings with a considerable delay. While banks continue to report resilient profitability, prolonged high financing costs, mounting refinancing pressure and weakening household finances are increasingly testing borrowers' ability to service their debt.
Should economic conditions deteriorate further, rising defaults, higher credit-loss provisions and eventual write-downs could significantly erode bank profitability. Importantly, banks may need to increase provisions well before actual defaults occur.
Today's strong earnings may therefore conceal vulnerabilities that are already building within the financial system. The real test for banks may still lie ahead.
Meanwhile, US Treasury yields remain historically elevated, equity valuations reflect considerable optimism, and investors appear increasingly comfortable with the assumption that corporate profitability will remain resilient.
I continue to see a widening gap between financial market valuations and underlying economic risks. In my view, investors are underestimating the potential consequences of persistently high interest rates, weakening credit quality and slowing economic growth.
This earnings season will be a critical test of whether corporate fundamentals can justify elevated market valuations, or whether expectations have once again moved too far ahead of economic reality.
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