Major U.S. banks delivered a split picture this week, as Middle East-linked market volatility lifted trading in the first quarter but clouded dealmaking prospects. Bank earnings are tracked beyond Wall Street, as they offer a real-time read on how households and businesses are navigating still-higher borrowing costs, spending pressures and an uncertain economy. The Week in Breakingviews newsletter offers insights and ideas from Reuters' global financial commentary team. Sign up here. Below are key trends from the first-quarter results at top U.S. banks, which often set the tone for the broader earnings season:
It was an extremely choppy quarter for markets, fueled by a selloff in global technology stocks on AI disruption fears, the Iran war and worries about the private credit sector. Wall Street traders emerged as the biggest winners from the market turmoil that spread across virtually every asset class, including equities, fixed income and commodities.
For years, top Wall Street banks have hoped dealmaking would break out of a slump. And in 2026, that started to materialize, with several big-ticket deals, and Elon Musk's SpaceX preparing for the biggest initial public offering of all time this summer.
However, volatile markets have tempered that optimism, with analysts flagging an uneven path forward for deals, if the war stretches out. "The banks were understandably reticent to be too bullish in their outlook statements, given the range of possible outcomes to the Middle Eastern conflict and the peace talks," Russ Mould, investment director at AJ Bell, told Reuters.
SPOTLIGHT ON LENDING AND CREDIT TRENDS Interest income rose across the big four U.S. lenders in the first quarter as loan demand rebounded. Borrowers were encouraged to take on debt again, but signs of softness in labor markets and limited visibility on the Federal Reserve's rate path are likely to keep banks cautious.
Credit quality remains broadly stable, with banks flagging only modest changes even as investors watch for signs of stress, especially around the banks' private credit business. This also supported loan growth across the sector, as rising credit losses typically prompt lenders to tighten. "Private credit is still just a smaller part of the overall credit spectrum. While there are some major headlines, the banks are in great shape to weather what's going on," said Macrae Sykes, portfolio manager at Gabelli Funds, which holds several large-cap bank stocks.
