JPMorgan Chase, Goldman Sachs, Bank of America

Expectations are high as banks begin reporting second-quarter results on Tuesday. JPMorgan Chase And Bank of AmericaIncome from trading equities and fixed income will approach or even exceed this level. records was determined earlier this year.

That’s a key part of what veteran analyst Mike Mayo of Wells Fargo calls the financial industry’s “sweet spot” right now. Both of banking’s profit engines (Wall Street and Main Street) are in growth mode at the same time.

The biggest US banks are getting rising fees for helping companies break into markets disrupted by last month’s giant SpaceX IPO; Risk-taking traders are also thriving as geopolitical unrest, including the Iran war, increases volatility across asset classes.

“You’ve seen the largest IPO in history, the pace of mergers on track for a record year, and the expansion of trading to include equities and fixed income across countless geographies,” Mayo told CNBC.

The quarter’s big bank earnings come at an unusually positive time for the sector. After years of grappling with recession fears fueled by high interest rates and inflation, lenders are benefiting from a rare combination of booming Wall Street activity, durable consumer credit and a long-awaited recovery in business lending.

“There’s not much more you can ask for,” Mayo said.

Trends that coincide with the Trump administration’s effort to loosen banking regulations have helped financial stocks outperform the broader market for the second year in a row, Mayo noted. This win also raises risks as investors look for signs that the momentum can continue into 2027.

JPMorgan, Bank of America, citigroup, Wells Fargo And Goldman Sachs They will release the results early Tuesday Morgan Stanley I report on Wednesday.

The group’s investment banking revenue could rise 26% from a year ago, while trading revenue could rise 14%, according to a KBW analyst. Chris McGratty.

Besides the hundreds of millions of dollars in fees that SpaceX paid banks — led by Goldman Sachs and Morgan Stanley — for its IPO, the companies collected fees to raise debt for the newly public company and also had the chance to manage the fortunes of newly minted millionaires and billionaires.

Moreover, Goldman and Morgan Stanley are likely to get so-called “soft dollars” from SpaceX’s IPO. Jay Ritter, Professor emeritus of finance at the University of Florida’s Warrington College of Business.

The soft dollar is actually fees hedge funds paid investment banks for part of an oversubscribed IPO, Ritter said.

“The biggest moneymaker in IPOs for investment banks is not the bankers’ fee, but the ability to allocate shares to hedge funds and some active investment funds that pay soft dollars,” he said.

McGratty, meanwhile, said trading gains were driven by strength in equities as equity markets rose during the quarter, as well as increased activity in fixed income after the conflict in Iran rattled oil prices, interest rates and currencies.

“Banks are doing a good job of capturing the upside of volatility these days, whereas in previous cycles they were caught offside,” McGratty said.

However, Mayo argued that the most important development this quarter could occur away from Wall Street.

As banks try to grab market share from private lenders and an AI-fueled spending boom spreads to the rest of the economy, a less attractive business like commercial lending could be turning the corner after years of weakness, he said.

“Demand has returned as companies have accepted uncertainty as the new normal and are building new factories, investing in facilities and continuing their business,” Mayo said.

This trend could benefit regional lenders, including: Fifth Third That’s because commercial lending represents a larger share of its business than at various giants like JPMorgan, Mayo said.