Q2 U.S. Banking Earnings Preview: “Cold IPOs, Hot Trading” — Investment Banking Set to Underperform for 14 Consecutive Quarters Below Key Threshold

TradingKey - As JPMorgan Chase and Bank of America report their Q2 2025 earnings this week, the U.S. banking earnings season officially begins. Analysts expect continued strength in market-making and trading businesses, while investment banking revenue remains stuck in a multi-quarter slump.

Analysts forecast that the five major Wall Street banks — JPMorgan, Bank of America, Citigroup, Goldman Sachs, and Morgan Stanley — will see total trading revenue rise about 10% YoY to $31 billion, while investment banking income is expected to fall 10% to around $7.5 billion.

If these forecasts hold, it would mean that trading revenue is now three to four times larger than investment banking revenue among the top-tier banks.

Furthermore, investment banking’s share of total bank revenue will likely remain below 25% — marking the 14th straight quarter below this key threshold since early 2022, and the longest stretch below 25% since at least 2014.

Trading Booms While IPOs Stall

While both businesses are volatile, only trading has seen strong performance recently, with rising volatility from geopolitical tensions and interest rate uncertainty fueling gains.

In contrast, IPO activity and M&A deal flow have remained subdued, despite market rallies and improved investor sentiment.

Financial Times noted that banks earn fees by facilitating deals and providing financing — and when markets are active and volatility is high, they tend to profit more. Historically, investment banking revenue was more profitable and less capital-intensive, making it more valued by investors.

Oppenheimer analysts pointed out that the current environment is actually “normal,” and that the low-volatility period of the 2010s was an anomaly. Over the past three years, financial markets have faced shocks including:

• Interest rate hikes
• Russia-Ukraine conflict
• Middle East tensions
• Trump’s protectionism

These factors have kept corporate executives and institutional investors on the sidelines — limiting new deal and issuance activity.

The firm believes that equity issuance may pick up in the fall, offering modest upside — but M&A activity will depend on the execution of already-announced deals in the second half.

Some Hope Remains

Morgan Stanley analysts believe Q2 investment banking revenue could outperform expectations, citing potential strength in underwriting and advisory fees. The firm highlighted Goldman Sachs, where investment banking revenue is projected to rise — and named it a top pick ahead of earnings season.

However, JPMorgan Chase, the largest U.S. bank, expects its Q2 investment banking revenue to decline in the mid-teens percentage range — continuing the broader industry trend.