Wall St banks caught in capital markets lull after a strong first half of 2026

By Manya Saini

Oct 15 (Reuters) - Quarterly results from Wall Street's big banks this week showed that even the largest and most robust players of the industry can be vulnerable to the ebb and flow of capital markets.

Dealmaking, a cyclical business, slowed in the third quarter and dented investment banking, as rising bond yields, choppy AI trade and geopolitical worries gave jitters to investors and corporate boardrooms alike, further delaying a long-awaited revival in M&As and IPOs.

Here is an overview of results from the six top US banks in charts, which kicked off the third-quarter earnings season for US companies:

TWO MISSES, LITTLE MARKET CHEER

JPMorgan Chase JPM.N posted its first profit miss since the fourth quarter of 2023, according to LSEG data, while its closest rival, Bank of America BAC.N, fell short of market expectations.

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The other four top US banks exceeded expectations, but their stocks traded lower or did not react as investors judged the earnings beats to be smaller than in previous quarters.

DEALMAKING STALLS

Dealmakers were looking forward to a bumper year, but momentum has stalled since the summer as market volatility, geopolitical turmoil, rising Treasury yields and concerns over the sustainability of the AI trade kept companies on the sidelines.

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Growth in investment banking fees slowed sharply compared to the prior quarter as an interest-rate hike and delays to several high-profile IPOs hit sentiment, even though executives reassured investors that they have not been canceled.

EQUITY AND FIXED-INCOME DESKS DIVERGE

The quarterly results revealed a sharp divide in trading performance at big banks: equity desks benefited from a surge in market activity, while fixed-income underperformed.

Market volatility typically boosts trading businesses as clients reposition portfolios and hedge against risks.

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CONSUMER BANKING: A STEADY ENGINE

Net interest income, the difference between what banks earn on loans and pay out on deposits, rose, with analysts expecting further support from the Federal Reserve's September rate hike.

Banking executives pointed to resilient consumer spending and borrowing, easing concerns that sticky inflation and elevated rates would strain household budgets. In a bright spot, loan demand also continued to chug along.

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BANKING INDEX VS S&P 500

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Here is a rundown of Reuters' coverage of the six largest U.S. banks:

• JPMorgan posts rare profit miss as dealmaking, bond trading lose momentum

• Goldman Sachs beats quarterly profit estimates on equities strength

• Wells Fargo beats profit estimates, but net interest income, revenue fall short

• Citi profit tops estimates on higher investment banking, services and wealth revenue

• Morgan Stanley beats quarterly profit estimates as stock trading desks shine

• BofA misses profit estimates on capital market weakness; books $1.2 billion charge