Banks weathered the Iran war. How did they do it and can they keep doing it?
Bank earnings this week confirmed one thing: The Iran war may be a major geopolitical upheaval, but it’s not a financial one. March, the last month of the first quarter, was brutal on Wall Street. The conflict began on February 28 and quickly led to rising oil prices and falling inventories. Wells Fargo shares fell to an almost eight-month low in mid-March, while Goldman Sachs fell to a fourth-month low a few weeks later. At the time, investors couldn’t sell stocks fast enough because of oil supply disruptions and concerns about what rising energy costs would mean for inflation and the consumer. The S&P 500 index closed at its wartime low on March 30, the day before banks closed their books for the quarter. While stocks are rising to record highs again on hopes that the war will end soon, the impact of April’s market movements won’t be seen until next quarter. Of course, they may have given the bank’s management teams some leeway to get a little more bullish in this week’s post-earnings calls. But looking at the reported first quarter figures, there were already reasons for optimism. Club name Goldman beat expectations in terms of both revenue and earnings, and other industry heavyweights such as JPMorgan, Morgan Stanley, Citigroup and Bank of America followed suit or at least met forecasts. Wells Fargo in the portfolio also lost some revenue but still beat expectations on earnings. On CNBC and at Club meetings this week, Jim Cramer took a vociferous look at Goldman, Morgan Stanley and Citi, which were doing well during the week. He expressed concerns about Wells, the worst performer in a week when the S&P 500 gained nearly 4.5%. Beyond the share price, three themes from earnings showed us why banks can still perform despite geopolitical turmoil. 1. Deals on Wall Street remain strong. Investment banking revenue rose 48% year over year to $2.48 billion, Goldman said Monday. In fact, CEO David Solomon said the investment banking environment “remains incredibly robust.” In addition to helping companies go public, this crucial work for Goldman also brings in money from advisory fees on mergers and acquisitions. That’s a big reason why we got into stocks to begin with. Wells’ investment banking revenue increased 68% year over year to $602 million. It’s a smaller but thriving business compared to Goldman. We’re pleased to see CEO Charlie Scharf diversifying the bank’s income so it isn’t so reliant on interest-based flows. Net interest income, an important profitability measure of the bank, disappointed us this quarter. “While market conditions may change, the outlook for investment banking remains strong and we entered the second quarter on a strong track driven by mergers and acquisitions and equity capital markets,” Scharf said on Tuesday’s earnings call. Wells has made significant investments in its deal-making unit in recent years. The firm has been expanding its business even further since the $1.95 trillion asset ceiling imposed by the Federal Reserve was lifted last summer. Of course, an asset cap was placed on Wells due to scandals in 2018, before Scharf joined the company. Outside of the portfolio, JPMorgan Chase said deal revenue rose 38% year over year to $3.1 billion. Citi reached $1.3 billion, with an annual increase of 19% in the same period. Of course, Wall Street executives acknowledged that the volatility caused by the war had hindered some deals. Ultimately, uncertainty makes companies more conservative with capital. During Goldman’s earnings call, Solomon said there’s “no doubt” that initial public offerings “were slowing down a little bit” in March. But he added that the firm has a “very full pipeline of deals.” Conclusion? Unless a quick resolution is found, conflict in the Middle East could push IPO plans to later in the year, according to Matt Kennedy, senior IPO market strategist at research firm Renaissance Capital. “Given that the last four years have been below average in terms of IPO activity creating these building deals, there was a lot of hope and optimism coming into 2026,” Kennedy told CNBC. he said. “We are tracking literally hundreds of companies that could go public but are sitting on the sidelines. [They’ve been] I’m waiting for the right time [and have] But Kennedy expects the slowdown to be temporary, pointing to this week’s big-name IPOs. HVAC firm Madison Air Solutions went ahead with its initial public offering, sending its shares up more than 17.5% on Thursday in the largest industrial offering since 1999. It rose again on Friday. Goldman and Wells Fargo had a hand in Madison. IPO. 2. Credit cards were an unexpected bright spot. Despite the overall loss of revenue, Wells Fargo’s credit card business grew significantly. During the call, CFO Mike Santomassimo said revenue for the bank’s retail banking and lending division specifically increased by 6.6%. High margin consumer lending space. Gas represents 6% of total debit card spending and 4% of total credit spending, Scharf said. “Consumers are spending more than a year ago, including spending more on gas, but they haven’t slowed spending on everything else,” CFO Jeremy Barnum added, despite higher gas prices. Businesses remain resilient.” He said growth in consumer spending also continued above last year’s pace. Revenue from JPMorgan’s combined card services and auto loans segment rose 13%. Credit card spending volume rose 9% from the prior year. JPMorgan and Wells make money on credit cards because banks earn more in fees and interest when customers use them more. Default rates for both banks have been relatively stable, meaning there’s less credit risk for firms. Credit cards aren’t particularly important for companies. Earlier this year, management said Credit cards were a core business for Capital One, which reports JPMorgan’s takeover of Apple’s credit card. Intense market volatility driven by the Iran-U.S. conflict led to further gains as volumes rose due to commissions and bid-ask spreads, with revenue rising 27% year over year to a new bank record of $5.33 billion, according to Sachs. “These results reflect our ability to execute for our clients while maintaining a strong focus on risk management in a highly dynamic environment.” FICC revenue declined 10% year over year due to lower interest rates. However, the segment increased 29% as war uncertainty caused more client portfolio repositioning. [bank] You really want to own Goldman because it was a really good quarter. The only thing that wasn’t good was FICC,” Jim said Friday. “They might change that, though.” Fixed-income revenues were better at other banks, such as Morgan Stanley, which posted a 29% year-over-year increase. Volatility in energy markets led to an increase in customer engagement during that period. Bank of America’s trading unit had its best quarter in 15 years. Share revenues rose 30% to $2.83 billion. Morgan Stanley also reported its best quarter in history. Trading for Wells, other Still, markets, which include trading, posted revenue growth of 19% from a year ago. “As macro and geopolitical uncertainty increases and clients shift to a substantially more selective and defensive stance, we continue to grow our markets business,” Scharf said.) By subscribing to CNBC Investment Club with Jim Cramer, you’ll receive a trade alert before Jim buys a stock in his philanthropic foundation’s portfolio. or waits 45 minutes after sending a trade alert before selling. 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