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Banks’ Strong Earnings Leave Investors Digging Deeper for Trouble Spots

Oct 17, 2025 02:00:00 -0400 by Rebecca Ungarino | #Banks #Feature

JPMorgan Chase‘s new headquarters in Midtown Manhattan. The country’s largest bank said this past week that consumers and small businesses ”remain resilient.” (Michael Nagle/Bloomberg)

Earnings from the country’s biggest banks show a booming Wall Street and a solid consumer. But a warning from Jamie Dimon took center stage.

Key Points

Even as a pair of bank disclosures rattled investors late this week, the largest U.S. banks’ latest financial results were so robust that they left some investors wondering what all the fuss was about.

Third-quarter earnings from the country’s biggest lenders— JPMorgan Chase, Wells Fargo, Bank of America, and Citigroup —and investment banks Goldman Sachs Group and Morgan Stanley showed Wall Street is booming, Main Street is humming, and consumers are generally on firm ground.

Across conference calls, analysts and journalists peppered bank chiefs with questions: Are financial risks piling up in ways investors can’t yet see? Are cracks forming in loan portfolios? Do the high-profile bankruptcies of two auto companies this fall mean borrowers are worse off than we thought?

In short, top executives said no.

“We’re not really observing anything other than continued strong performance in the credit portfolios,” BofA Chief Financial Officer Alastair Borthwick said. Like its competitors, his firm’s net charge-offs and delinquencies improved. On the whole, “credit portfolios are performing very well at this point,” he said.

Borthwick’s counterparts generally shared that view. Wells Fargo set aside less money to cover customers who might fall behind on loan payments. Citi said a measure of delinquencies improved over the past year. JPMorgan, the largest U.S. bank, lowered its expected net charge-off rate—a measure of loans viewed as unrecoverable—across cards to 3.3% from 3.6% for this year.

Consumers and small businesses “remain resilient,” said Jeremy Barnum, JPMorgan’s finance chief. Credit would eventually suffer if the labor market weakens, he said, but that is “not happening yet.”

Together, the largest banks—with vast windows into global economies—presented solid messages about consumers’ and businesses’ health. Against sticky inflation, trade wars, a government shutdown, and the Trump administration’s U.S. immigration policy pressuring the labor market, the banks’ results fit a pattern of seeming paradoxes across the economy.

Stock prices are near all-time highs, while consumer sentiment is weak. Economic activity is flattening and companies are laying off employees, according to the Federal Reserve’s latest Beige Book, even as consumer spending remains high and unemployment is relatively low.

Still, a pall hung over bank earnings this past week. The recent collapse of auto companies First Brands and Tricolor Holdings raised investor worries that something, somewhere, is breaking. Disclosures from regional lenders Zions Bancorporation and Western Alliance Bancorporation about challenges with individual borrowers added to the worries and weighed heavily on bank stocks as this past week came to a close.

“The banks reporting so far have all been fine, actually better than expected,” Truist Securities’ Brian Foran says, citing encouraging credit costs, consumer delinquencies, and troubled commercial assets. “That said, investors are spooked by a third chunky fraud loss in the past six weeks.”

Some bank leaders labeled areas of weakness as one-off items, while noting they are on guard for signs of distress. On Citi’s earnings call, BofA Securities analyst Ebrahim Poonawala noted a rise in corporate and consumer borrowers’ nonaccrual loans and wondered whether the firm saw “red or yellow flags” in its client base. Mark Mason, Citi’s finance chief, said “two idiosyncratic downgrades” drove up corporate nonaccruals, and that he wasn’t seeing concerning trends in consumer delinquency data.

Other major U.S. banks released encouraging credit metrics. PNC Financial Services Group, which is set to expand after striking a deal to acquire a smaller Colorado-based lender, said total delinquencies declined from last quarter. Net loan charge-offs also fell. PNC CEO Bill Demchak said he is comfortable with economic conditions as long as employment holds up and consumers spend.

“I think the economy is fine,” Demchak said.

Banks’ Wall Street operations, meanwhile, are enjoying a boomtime that boosted earnings. Bankers rely on clients’ appetite for dealmaking and confidence in stable capital markets, and traders’ fortunes hinge on loads of volatility. Both groups notched remarkably strong quarters around the industry.

Goldman’s global banking and markets business has driven record revenue so far this year, while Morgan Stanley’s equity-underwriting revenue surged 80% and Wells Fargo’s investment banking fees jumped 25% from a year ago. Morgan Stanley CEO Ted Pick said that while geopolitical uncertainty could prompt “pauses,” investment banking “over the next couple of years should be generally up and to the right.”

As the earnings reports rolled in, shareholders’ reactions were mixed. Morgan Stanley and Wells Fargo stocks hit records, while BofA shares had their best single day since April. But shares of JPMorgan and Goldman slumped.

By the end of the week, the earnings numbers had taken a back seat to comments from JPMorgan CEO Jamie Dimon, who said the Tricolor and First Brands failures gave him pause. He told reporters his bank’s exposure to Tricolor was “not our finest moment.” (Tricolor led to a $170 million charge-off; JPMorgan said it has no First Brands exposure.)

“I probably shouldn’t say this, but when you see one cockroach, there are probably more,” he told analysts. “Everyone should be forewarned on this one.”

Dimon left investors with an image of financiers stamping out bugs on their kitchen floors and a message that, sooner or later, trouble would return to banks’ balance sheets.

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