Earnings Season Kicks Off: Strong Signal for US Market Revival?

Q4 earnings season kicks off this week, with the spotlight firmly on the US banking giants. Investors need to keep a close watch on potential profit surges driven by the comeback in deal-making and stock trading activities.

Key Takeaways

• Global M&A volume jumped 42 percent, becoming the main catalyst for investment banking revenue.

• Citigroup is projected to lead with the highest profit growth of up to 21 percent year-on-year.

• Market focus will shift to 2026 guidance and confirmation of a broader market recovery.

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The wave of earnings releases starts with JPMorgan Chase & Co. and The Bank of New York Mellon Corporation on Tuesday. Investment banking revenue is expected to be the main growth engine after deal activity accelerated significantly throughout 2025.

According to Dealogic data cited by Reuters, global investment banking revenue rose 15 percent to US$103 billion. This uptick aligns with merger and acquisition (M&A) volume, which leaped 42 percent year-on-year (YoY) to hit US$5.1 trillion.

Among the global systemically important banks (GSIBs), analyst consensus expects Citigroup Inc. to lead the pack with earnings per share (EPS) growth of 21 percent YoY. Meanwhile, The Bank of New York Mellon Corporation is predicted to record a 15 percent increase in the trust bank category.

What Determines the Next Move

While Q4 numbers matter, the forward guidance is the real game-changer here. Morgan Stanley analysts note that confirmation of a broadening capital markets rebound will matter more to the market than just past profit realization.

This optimism is backed by The Goldman Sachs Group, Inc. CFO Denis Coleman, who mentioned last month that sponsor-led deal volumes rose 40 percent in 2025. Although M&A volume surged 65 percent in Q4, deal completions are expected to flow through into next year.

On the trading front, revenues are poised to grow 8 percent YoY, beating the market consensus of 7 percent. Morgan Stanley projects equities trading revenue to grow 12 percent, outpacing FICC (fixed income, currencies, and commodities) trading revenue which is only up by 5 percent.

Evercore ISI analyst Glenn Schorr adds that trading and wealth management operations will drive growth in 2026. He recommends Bank of America Corporation and JPMorgan Chase & Co. as top picks for net interest income growth in the coming year.

Investors should also note the change in tax investment accounting methods at Bank of America Corporation. Management states this change aims to align financial statements with the economic impact of investments, though it resulted in a US$1.7 billion decrease in retained earnings as of September 2025.

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Reference:

• Seeking Alpha, Banks' Q4 earnings seen rising on M&A, trading activity. Accessed on January 12, 2026

• Featured Image: Shutterstock

Disclaimer

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