Banks Had a Blistering Rally. Earnings Are the Next Test.

Brian Moynihan (left), CEO of Bank of America; Jamie Dimon, CEO of JPMorgan Chases; and Jane Fraser, CEO of Citigroup. (Getty Images)

As the largest U.S. banks prepare to release earnings next week, their shares have surged to prices that may give them little room for error as investors evaluate the results.

JPMorgan Chase , Bank of America , Wells Fargo , and Citigroup —the country’s four biggest banks—as well as Goldman Sachs and Morgan Stanley will start to report their second-quarter numbers on Tuesday.

Wall Street generally expects the banks to post higher revenue and profits than they did a year ago. Still, as lenders’ shares have ridden to records, or to their highest levels in a year, several analysts are warning clients that valuations are stretched, and the rally may peter out.

HSBC analyst Saul Martinez downgraded JPMorgan, Goldman, and Bank of America this week. He is still optimistic about their business fundamentals, he said, but their run-up gives him pause.

“We don’t think JPMorgan should trade like a tech giant. It is a banking institution,” wrote Martinez, who noted that the bank is trading at historically high price-earnings premiums relative to competitors.

Investors have bought up shares of the economically sensitive group as fears over the Trump administration’s tariffs appear to have subsided for now, U.S. stock markets stage a remarkable comeback from early-spring depths, and a new slate of bank regulators push to dial back post-financial crisis rules. That shift could boost firms’ profitability.

The KBW Nasdaq Bank Index rose 9.6% in the first half of 2025, its best first-half performance in four years, underscoring investors’ confidence.

That is all priced into the banks’ shares already, Bank of America Global Research analyst Ebrahim Poonawala wrote. Stocks likely need support from higher forecasts for earnings, which could come as the lenders weigh in with their guidance, to continue rallying, Poonawala said in a Wednesday report titled, “Time for a breather?”

The banks’ reports will give investors a window into how investment bankers, trading desks, consumer-banking businesses, and wealth-management arms fared during the volatile second quarter. Stocks plunged following President Donald Trump’s April tariff announcement before reclaiming those losses in the months since.

While uncertainty remains about how the Trump administration’s negotiations with trade partners will unfold and how interest rates may change under the next Federal Reserve chair, financial regulators appointed by Trump have helped propel the sector.

Christopher McGratty, head of U.S. bank research at KBW, wrote this week that he is bullish “on the interplay between capital return and deregulation, with this lurking catalyst likely to result in greater buybacks for Universal banks and to a lesser extent the Large Regionals.”

Investors will listen for executives’ commentary about the outlook for dealmaking, net interest income, and trading, which are all key areas of revenue, as well as their broader economic outlook.

Here is a snapshot of what sell-side analysts anticipate for the second quarter on a GAAP basis, according to FactSet estimates, compared with the banks’ reported results for the second quarter of 2024.

Bank of America:

Earnings per share of 86 cents vs. 83 cents

Revenue of $26.75 billion vs. $25.38 billion

Net interest income of $14.84 billion vs. $13.7 billion

Citigroup:

Earnings per share of $1.61 vs. $1.52

Revenue of $20.96 vs. $20.1 billion

Net interest income of $14.1 billion $13.49 billion

Goldman Sachs:

Earnings per share of $9.59 vs. $8.62

Revenue of $13.45 billion vs. $12.73 billion

JPMorgan Chase:

Earnings per share of $4.48 vs. $6.12*

Revenue of $43.9 billion vs. $50.2 billion

Net interest income of $23.6 billion vs. $22.9 billion

*On an adjusted basis, a year ago JPMorgan reported $4.40 per share

Morgan Stanley:

Earnings per share of $1.96 vs. $1.82

Revenue of $16 billion vs. $15 billion

Wells Fargo:

Earnings per share of $1.41 vs. $1.33

Revenue of $20.76 billion vs. $20.69 billion

Net interest income of $11.9 billion vs. $11.92 billion

Write to Rebecca Ungarino at rebecca.ungarino@barrons.com