What to Watch in This Banking Earnings Season: JPMorgan Under Pressure on Costs, Rates, Momentum

The upcoming Q4 2025 earnings week will be pivotal in determining whether the recent rally in bank stocks reflects sustainable underlying performance or merely short‐lived momentum. JPMorgan and BNY Mellon lead off on January 13, followed swiftly by the rest of the large banks, creating a compressed period where surprises—both positive and negative—are likely to provoke strong market reactions.

Revenue streams & valuation support strong expectations. JPMorgan’s diversified revenue model—roughly equal thirds from consumer/community banking, corporate & investment banking, and commercial banking plus asset & wealth management—buffers it from any single weak spot. Investors have rewarded that configuration with a premium P/E (~15.3×) compared to peers like Bank of America (~13.2×) and Citigroup (~10.5×). This makes the bar high: management not only has to meet but to point toward upside, especially in non‐lending segments.

Cost pressures undercut operating leverage. JPMorgan projects its 2026 expenses to hit approximately US $105 billion, driven largely by growth and volume‐related expenses (especially in consumer and community banking), strategic investments in technology/AI, compensation, branch growth, and inflation in real estate and overhead. These costs exceed Street expectations (~US $100–101 billion) and represent a near 9–10% increase over 2025 levels; investor reaction to this outlook was notably negative.

Investment banking & markets: the upside engine. Deal activity for U.S. investment banks picked up strongly in 2025: total IB revenue for the major banks is expected near US $38 billion with Q4 alone contributing ~US $10 billion—both up materially year over year. JPMorgan’s margins in markets revenue (trading, underwriting) are forecast to grow in low double digits, while investment banking fees are expected to rise in low single digits for Q4 2025.

NII & credit risks: tightrope ahead. After a year of falling rates, sustaining net interest income is harder. Expectations are for JPMorgan’s Q4 NII to be about US $25 billion (or ~$23.5 billion ex‐markets) with implications for 2026 depending on rate moves. On credit, while overall metrics are stable, concern persists in credit cards and commercial real estate; tightening loan yields may not offset rising funding costs or be resilient against macro weakness.

Guidance will define the narrative. Given high valuations and elevated investor expectations, banks will not be forgiven for tepid outlooks. Key areas to watch in management commentary include expense discipline, loan and deposit yield spreads, credit cost assumptions, and the sustainability of fee income growth. An upbeat narrative could extend the rally; warnings or conservative projections may trigger corrections in bank stocks and financial sector sentiment.