Major U.S. banks are on track to post more than $40 billion in trading revenue for the first quarter, as heightened geopolitical tensions helped drive sharp movements across financial markets, the Financial Times reported Sunday.
Institutions including JPMorgan Chase (JPM), Goldman Sachs (GS), Morgan Stanley (MS), Citigroup (C) and Bank of America (BAC) are expected to report their strongest combined quarterly trading performance in more than a decade, based on analyst estimates.
Forecasts suggest the group’s trading income will rise roughly 13% compared with the same period last year, even against a backdrop of already elevated volatility in early 2025 driven by policies under Donald Trump.
Middle East, Venezuela hot spots
Market turbulence intensified further in the latest quarter, fueled by conflict in the Middle East and U.S. military actions tied to Venezuela, which triggered large swings in commodities, equities and currencies. Analysts say such conditions tend to boost trading activity, as clients reposition portfolios and hedge risks.
The unrest contributed to a surge in oil prices alongside declines in equities, raising concerns that higher energy costs could stoke inflation and weigh on global growth. Recent data shows the conflict has indeed driven energy-led price pressures and market uncertainty.
Within trading divisions, equities are expected to deliver the strongest gains, outpacing fixed income, currencies and commodities. Analysts project equity trading revenue growth in the mid-teens percentage range, compared with high-single to low-double-digit increases for FICC businesses.
At the same time, banks are benefiting from structural shifts made after the 2008 financial crisis. Trading desks today are less focused on taking large directional bets and more oriented toward facilitating client activity and providing liquidity, which allows them to capitalize on periods of elevated volatility.
Investment banking divisions are also likely to show improvement. Fee income from advisory and underwriting is projected to rise by more than 10% across the major banks, supported by a rebound in dealmaking. Increased financing tied to artificial intelligence projects and a more accommodating regulatory environment have helped revive activity after a prolonged slowdown.
Volatility’s consequences
Even so, the outlook is not without risks. Analysts warn that sustained geopolitical instability could dampen capital markets activity, particularly in equities, where volatile conditions may discourage companies from pursuing initial public offerings or other listings, the FT reported.
Overall, profits at the largest banks are expected to increase by around 7%, with firms more heavily exposed to trading and investment banking, such as Goldman Sachs (GS) and Morgan Stanley (MS), likely to see the biggest gains.
Earnings season is set to begin with Goldman Sachs (GS), followed by J.P. Morgan (JPM) and Citigroup (C), with Morgan Stanley (MS) and Bank of America (BAC) reporting shortly thereafter.
Investors will also be watching banks’ exposure to private credit markets, where recent fund outflows have raised concerns about asset quality. Lending to hedge funds and private capital firms has expanded significantly in recent years, offering higher returns but also introducing new risks in a more uncertain environment.
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