- Moody’s expects Wall Street banks to post stronger Q4 2025 earnings than Q4 2024, led by debt underwriting and equities trading.
- Equity underwriting and advisory fees are likely to lag year-ago levels, leaving results more reliant on markets revenue.
- Trading should stay robust across cash equities, equity derivatives, and key fixed-income products, supported by higher volumes and wider spreads.
- Upside hinges on sustained M&A and capital issuance, while risks include deal-flow durability, regulatory shifts, and macro or credit shocks.
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Moody’s latest assessment indicates that Wall Street’s Q4 2025 earnings cycle will likely show meaningful improvement overall compared with Q4 2024, driven by several interlinked trends. Primary among them is a resurgence in debt underwriting – both investment grade and high yield – and a strong equities trading environment rising on wider bid-ask spreads and surging volumes in both cash equities and derivatives. In contrast, equity underwriting and advisory revenue are seen as weaker relative to past year levels, suggesting banks will lean more heavily on trading and underwriting rather than advisory work to meet earnings expectations.
Supporting these projections, recent reporting and analyst estimates confirm a sharp rebound in investment banking revenue across several major institutions, with global ibank-fee revenue up about 15% year-over-year to nearly $103 billion in Q4 2025, and M&A volumes rising ~42% to $5.1 trillion for 2025. Elevated trading revenues in fixed income, commodities, and equities also figure prominently in consensus forecasts. Net interest income growth and pro-growth policy sentiment (including regulatory expectations) are viewed as tailwinds, albeit subject to counter risks from interest rate uncertainty, inflation pressures, and credit quality.
Strategically, the environment appears favorable for banks with diversified platforms that can capture gains across underwriting, trading, advisory, and net interest income. Firms with strong equities and FICC trading desks, exposure to high-yield debt issuance, and large advisory pipelines will likely outperform peers. However, headwinds include whether the IPO pipeline can sustain momentum, whether advisory fees will recover, and how regulatory or macroeconomic shocks (e.g., tighter monetary policy, adverse credit events) may disrupt expected trends.
Supporting Notes
- Moody’s expects “solid improvements in debt underwriting and equities trading revenue, slightly weaker equity underwriting and advisory revenue, and stable fixed income, currencies and commodities (FICC) trading revenue” in Q4 2025 compared with Q4 2024.
- Debt issuance volumes in Q4 are projected to be higher, led by investment-grade and high-yield bonds.
- While secondary equity offerings are down, IPOs are “up significantly” versus a year ago.
- Trading volumes hit record levels in both cash equities and equity derivatives; bid/ask spreads widened in equities.
- Trading in major fixed-income instruments was robust year-over-year, especially in structured products, corporate bonds, and convertible bonds. Credit ETFs saw higher volumes.
- Global investment banking revenues rose ~15% YoY to nearly $103 billion in Q4 2025; M&A volumes surged ~42% to $5.1 trillion in 2025.
- Banks’ earnings expectations: JPMorgan EPS up ~3%, Bank of America ~17%, Wells Fargo ~17.5%, and Citigroup ~32%, largely driven by capital markets strength. Goldman Sachs may see a decline.
- Equity trading growth: equities trading up ~15% globally in 2025; forecasting advisory and origination revenue rising ~8%, FICC revenue up >8%.