PREVIEW-US bank profits to rise on deals, but Iran war fuels outlook uncertainty

By Nivedita Balu

April 8 (Reuters) - Large U.S. banks are set to post higher quarterly earnings on strong interest income and investment banking fees, analyst estimates show, though investors will focus on forecasts as rising geopolitical risks involving Iran add to macroeconomic uncertainty.

Goldman Sachs GS.N will kick off earnings season for banks on Monday. The largest U.S. lender, JPMorgan Chase JPM.N, will report on Tuesday along with Wells Fargo WFC.N and Citigroup C.N. Bank of America BAC.N and Morgan Stanley MS.N will report on Wednesday, April 15.

The banks will report results for the three months ending March 31, during which global markets swung as investors grappled with uncertainty tied to wars in the Middle East and Ukraine, volatile oil prices and broader geopolitical risks.

U.S. President Donald Trump said on Tuesday that he had agreed to a two-week ceasefire with Iran, less than two hours before his deadline for Tehran to reopen the Strait of Hormuz or face widespread attacks on its civilian infrastructure.

ROBUST DEALMAKING

Still, several companies sought large mergers and acquisitions before financing conditions changed, leading to bursts of dealmaking and trading activity.

The highlight of the first quarter has been robust dealmaking as nearly two dozen mega deals worth over $10 billion were reached globally, along with 40 deals valued at over $5 billion, according to LSEG data.

Jefferies analysts noted global M&A proxy fees of $11.3 billion in the first quarter, led by Goldman.

Investors will be keen to hear how the big lenders plan to navigate a period of uncertainty.

"We expect trading volumes to benefit from recent geopolitical risk, while investment banking, mortgage and wealth are likely softer until the conflict is resolved," said David George, a banking analyst at Baird, in a note.

JPMorgan Chase CEO Jamie Dimon warned in a letter to shareholders on Monday that the U.S.-Israeli war on Iran risks oil and commodity price shocks that could keep inflation sticky and push interest rates higher than the market expects.

Another focus on earnings calls will likely be the outlook for 2026 loan growth, especially commercial and industrial and commercial real estate, said Gerard Cassidy, an analyst at RBC Capital Markets.

Federal Reserve data suggests C&I growth accelerated in the first quarter, but uncertainty regarding the Middle East conflict and the subsequent rise in oil prices could weigh on the outlook if the conflict is protracted, he said.

BANK EXECUTIVES' COMMENTS AHEAD OF Q1 EARNINGS

JPMORGAN

In February, JPMorgan Chase said it expects investment banking fees and markets revenue to log strong growth in the first quarter, easing concerns that a recent equity market selloff has hit deal pipelines.

BANK OF AMERICA

Bank of America expects interest income to grow at least 7% and investment banking fees to climb 10% in the first quarter, its Co-President Dean Athanasia said on March 10.

CITIGROUP

CEO Jane Fraser said in March the bank expects mid-teens percentage growth in its investment banking fees and markets revenue in the first quarter, as the Wall Street bank sees strong activity in both divisions despite escalating global tensions.

WELLS FARGO

The lender expects loans to grow this year, betting on credit cards and autos while momentum in mortgages will pick up, Chief Financial Officer Mike Santomassimo said in February.

GOLDMAN SACHS

CEO David Solomon said in March he expects mergers and acquisitions activity to accelerate in 2026 despite the disruption caused by the U.S.-Israeli war on Iran.

MORGAN STANLEY

Chief Financial Officer Sharon Yeshaya said in January the bank was seeing an accelerating pipeline in M&A and initial public offerings with deals in healthcare and industrials.

Sources: Average analyst estimates compiled by LSEG, company results