The U.S. banking industry entered the third quarter of 2026 with a supportive operating backdrop, characterized by healthy loan and deposit growth, resilient trading activity and improving dealmaking conditions. However, recent capital markets indicators suggest that the quarter may not be as strong as initially anticipated, particularly for banks with greater exposure to investment banking (IB) and trading.

According to a Yahoo Finance article citing Evercore’s August Capital Markets Monthly report, quarter-to-date industry indicators are tracking below expectations, suggesting that consensus estimates for third-quarter investment banking (IB) and trading revenues may be somewhat elevated. This could have varying implications for JPMorgan (JPM Quick QuoteJPM - Free Report) , Bank of America (BAC Quick QuoteBAC - Free Report) , Citigroup (C Quick QuoteC - Free Report) , Goldman Sachs (GS Quick QuoteGS - Free Report) and Morgan Stanley (MS Quick QuoteMS - Free Report) , given the differing contributions of capital markets businesses to their overall revenues.

Banks with greater dependence on advisory, underwriting and institutional trading are likely to be more sensitive to any shortfall, while diversified institutions could receive greater support from lending, payments, wealth management and other recurring revenue streams. Consequently, third-quarter performance could vary meaningfully across the major U.S. banks despite a generally favorable industry backdrop.

Investment Banking & Trading Trends Remain Mixed

Capital markets trends have been mixed so far in the third quarter. IB volumes declined 6% year over year in July due to an 18% drop in debt capital markets and syndicated lending. However, strength in other areas remained encouraging, with equity capital markets volumes surging 119% and merger and acquisition (M&A) activity rising 11%.

Trading indicators have been relatively stronger. Within fixed income, currencies and commodities (FICC), foreign exchange trading volumes increased 17% year over year, commodities rose 17%, credit gained 10% and rates activity increased 2%. In equities, Chicago Board Options Exchange (CBOE) volumes declined 4%, but retail trading activity jumped 43%, options volumes increased 14% and average margin balances rose 32%.

Overall, strength in M&A, equity issuance and client trading activity should provide support to capital markets revenues. Nevertheless, weakness in debt issuance and elevated Street expectations could cap the upside. Hence, even solid year-over-year growth in IB and trading revenues may not be enough for some banks to meet consensus estimates.

How JPM, BAC, C, GS & MS Stack Up

Among the five banks, Goldman Sachs and Morgan Stanley appear the most sensitive to weaker-than-expected capital markets conditions because IB and institutional trading remain key contributors to their earnings.

Goldman Sachs stands to benefit considerably from continued strength in M&A and equity underwriting, supported by its strong advisory franchise. Still, weakness in debt capital markets could offset some of those gains and moderate the pace of investment banking revenue growth.

Morgan Stanley faces similar exposure. However, its sizeable Wealth Management franchise provides a more stable revenue base that could help cushion any softness in investment banking or trading.

JPMorgan also has substantial exposure to investment banking and markets, making softer capital markets trends relevant to its third-quarter performance. Yet its highly diversified business mix, spanning consumer and commercial banking, payments and asset management, reduces its dependence on any single revenue source. This should provide JPM with a stronger buffer if underwriting or trading revenues fall short of expectations.

Bank of America and Citigroup could see a more balanced impact. Both operate sizeable investment banking and markets businesses, but their results are also driven substantially by traditional banking and recurring fee revenues. BAC’s large consumer banking and wealth-management franchises should provide an important cushion against weaker capital markets fees. Citigroup likewise benefits from a broader earnings mix that includes Services, Wealth and U.S. Personal Banking.

Balance-sheet trends could offer additional support. Evercore noted that average loan and deposit balances were each up 6% year over year. If this momentum continues, stronger balance-sheet growth could support net interest income and help offset capital markets softness, particularly at JPM, BAC and C.

What Investors Should Watch

The key takeaway is that third-quarter results across the major banks could diverge more sharply than headline industry trends imply.

Continued strength in M&A, equity underwriting and selected trading businesses could partly offset weakness in debt capital markets. At the same time, healthy loan and deposit growth could provide an important earnings cushion for banks with more diversified business models.

Investors should therefore look beyond headline IB and trading revenues and focus on the composition of results. Management commentary on deal pipelines, client activity, trading conditions and the durability of loan and deposit growth will also be important in assessing earnings momentum heading into the final quarter of the year.

Overall, the fundamental backdrop for the U.S. banking industry remains constructive. However, softer-than-expected capital markets indicators raise the possibility of a more uneven third-quarter earnings season, with GS and MS facing greater sensitivity to capital-markets trends and diversified players such as JPM, BAC and C benefiting from broader sources of earnings support.