Khaberni - Wall Street banks are expected to announce trading revenues that exceed $40 billion USD for the first quarter of the year.
This comes after the Middle East war and the American military operation in Venezuela revived volatility in the financial markets.
According to forecasts collected by Bloomberg and data from Visible Alpha, next week, JP Morgan Chase, Goldman Sachs, Morgan Stanley, Citigroup, and Bank of America are expected to reveal their highest quarterly trading revenues in at least 12 years.
This represents a 13% increase from the first quarter of last year for the top five US banks, although early 2025 experienced unprecedented volatility due to trade wars launched by U.S. President Donald Trump.
The conflict in the Middle East led to record highs in oil prices and a sharp decline in the stock market, in addition to fears of a global inflationary wave potentially pushing some economies into recession, according to the Financial Times.
Despite sharp fluctuations in oil prices, analysts still expect stronger growth in stock trading compared to fixed-income, currencies, and commodities trading.
It is expected that banks will record growth ranging between 13% and 15% in stock trading, and between 8% and 13% in fixed-income, currencies, and commodities trading, with JP Morgan and Citigroup expected to make the largest gains.
Following the financial crisis in 2008, investment banks were forced to restructure their trading operations, now focusing less on market trend bets and more on facilitating and financing their clients' trading activities.
It is also expected that investment banking fees will continue to rise during the current quarter, with analysts anticipating increases exceeding 10% across all five banks, according to the newspaper.
Deal-making activities have seen a resurgence in recent months after years of slowdown, driven by demand for financing artificial intelligence projects and loosening regulatory constraints.
Despite escalating geopolitical uncertainty during the last quarter, the banks will have earned fees from deals announced last year and completed in the first three months of this year.
Banks' profits are expected to increase by about 7% overall, with Goldman Sachs and Morgan Stanley achieving the greatest gains.
These banks primarily focus on trading and investment banking services.
Analysts warn that investment banking fees may be negatively impacted by the prolonged conflict in the Middle East. Also, stock market volatility could weaken investor interest in public offerings.
RBC Capital Markets analyst Gerard Cassidy told the Financial Times, "At the onset of the Russian-Ukrainian war in the first quarter of 2022, we saw an increase in volatility as a result, and we will see it again in the first quarter of 2025 due to hostilities in the Middle East."
Cassidy added, "If there is any expected weakness in the last quarter due to these increasing volatilities, it could be in the equity capital markets sector."
Goldman Sachs will kick off the earnings season on Monday, followed by JP Morgan and Citigroup on Tuesday, while Morgan Stanley and Bank of America will announce their results on Wednesday.
Investors will also scrutinize banks' exposure to non-bank lenders following a wave of redemptions in private credit funds driven by credit quality concerns.
In recent years, banks' lending to private equity firms and hedge funds has thrived, as lenders sought higher yields at a relatively low capital cost.
