Amid tariff turmoil, Wall Street's major banks kick off earnings season: trading revenue may surge to a record high, but investment banking mergers and acquisitions are in jeopardy

Against the backdrop of market turbulence triggered by tariff policies, the first quarter financial reports expected to be released by the five major Wall Street investment banks are anticipated to show significant divergence: the trading departments are likely to achieve their best performance in a decade, while investment banking continues to struggle amid uncertainty.

According to Visible Alpha data, Goldman Sachs, JP Morgan, Morgan Stanley, Bank of America, and Citigroup are expected to generate approximately $34.5 billion in equity and fixed income trading revenue in the first quarter, a year-on-year increase of 10%, marking the highest level since at least 2014.

However, the investment banking business faces challenges. Although the total revenue from investment banking for the five banks in the first quarter is expected to grow by 3% to about $7.65 billion, this revenue primarily comes from fees for announced merger and acquisition deals, while the number of new deals announced since January has hit the lowest level in over a decade.

Trump's policies towards Wall Street are a double-edged sword; the market volatility caused by his tariff policies is expected to drive a significant increase in trading volumes this quarter, while suppressing merger and acquisition and IPO revenues in the investment banking sector. HSBC banking analyst Saul Martinez stated:

“Market volatility is favorable for sales and trading businesses, but unfavorable for investment banking.”

Investment Banking Business Cools Amid Market Volatility

JP Morgan, Morgan Stanley, and Wells Fargo will be the first to release their financial reports on April 11, followed by Goldman Sachs on April 14, with Bank of America and Citigroup following the next day. Market estimates indicate that the collective profits of these six largest U.S. banks are expected to grow by about 5% year-on-year.

However, Trump's protectionist measures have severely impacted Wall Street's expectations for healthy growth in the U.S. economy and a rebound in merger and acquisition activity this year. The first quarter has been the worst-performing quarter for the U.S. stock market in nearly three years.

On Monday, Morgan Stanley analysts pushed back their expectations for the investment banking business to return to normal activity levels by two years, to 2028, citing extreme market volatility. Oppenheimer's managing director of research, Chris Kotowski, stated:

"No one can say how long this situation (the decline in U.S. stocks) will last, but it is certainly enough to impact investment banking revenues this year."

Earnings Season Approaches, Credit Card Defaults Become New Concern

In addition to the performance of trading and investment banking businesses, investors will also closely monitor any rise in losses within bank loan businesses. During and after 2020, U.S. consumers were flooded with government stimulus funds, leading to an increase in credit card debt.

"Most of the losses for the big banks today are certainly credit card losses," Kotowski said:

"In the fall of 2022, credit card loan portfolios grew at a rate of 18%. Whenever you grow that fast, a series of losses will follow."

Since the 2008 financial crisis, the trading business of large investment banks has evolved from proprietary trading that used their own capital to bear risks to providing trading facilitation and financing for other investors Although trading revenue was strong in the first quarter of 2025, there are concerns that if the current economic uncertainty continues, clients may ultimately choose to wait and see. Martinez stated:

"There is a lot of volatility, and people are trading around events and market trends. This helps. But if poor volatility leads investors to avoid risk, that would be detrimental to future trading."

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