The four big banks that reported on October 13 describe a healthy US economy. Card charge-off rates fell at JPMorgan and Wells Fargo, card losses fell at Citi, card spending rose 10% at JPMorgan, and loans grew 10% to 12%. Net interest income rose on volume rather than margin. At the same time JPMorgan, Citi and Goldman all pointed to corporate credit or the economic outlook when they added to provisions, trading and dealmaking cooled from the second quarter, and CET1 ratios slipped at three of the four banks as buybacks shrank. Our reading: a soft landing that is losing some momentum. That is a supportive backdrop for the broad market, while the tailwinds for bank stocks themselves are getting thinner. The open question is whether the wholesale reserve builds are simple caution or the first sign of a corporate credit cycle.
The big banks show a healthy US economy with strong credit growth and a stable consumer, but also early caution on corporate credit, cooling capital markets after a strong second quarter, and higher long-term rates. That is constructive for the broad market, while the support for bank stocks themselves is fading.
The same metrics side by side. Where a report does not contain a figure, the table says so rather than filling the gap.
| Metric | JPM | WFC | GS | C |
|---|---|---|---|---|
| Diluted EPS | $5.57 vs $5.07; $5.75 ex securities losses | $1.87 vs $1.66, +13% | $17.01 vs $12.25 | $2.85 vs $1.86; $2.24 ex notable item |
| EPS vs consensus | not in report | not in report | not in report | not in report |
| Revenue | $50.9B, +8% (managed) | $21.9B, +2% | $18.7B, +23% | $23.8B, +8% |
| Net interest income | $27.1B, +13%; ex Markets $24.7B, +6% | $12.5B, +5% | not in report | $17.0B, +14% |
| Provision | $2.74B, −19%; incl. $539M reserve build | $1.03B vs $0.68B; incl. $46M build | $368M; prior year not in report | $2.59B, +6%; incl. $369M build |
| Net charge-offs | $2.20B; rate 0.59% vs 0.76% | $983M; rate 0.38% vs 0.40% | not in report | $2.22B; rate 1.09% vs 1.21% |
| IB fees | $3.0B, +14%; −8% vs Q2 | Banking +8%, M&A +30% | $3.22B, +21%; −5% vs Q2; backlog down | $1.35B vs $1.24B, ≈ +9% calculated |
| Equities | $5.0B, +49% | +21% | $6.44B, +72% | $1.73B, +14% |
| Fixed income | $5.4B, −4% | declined | $3.47B, essentially unchanged | $4.39B; change not in report |
| Expenses | +12% | −1% | +20% | −2% (+3% ex prior-year impairment) |
| CET1 | 13.9% est.; Q2 14.2% | 10.0% prelim.; Q2 10.3% | 12.4% prelim.; Q2 12.9% | 12.8% prelim.; unchanged |
| Buybacks | $1.06B gross; Q2 $6.70B | $2.5B; Q2 $3.0B | $3.0B; no comparison in report | Total capital returned $4.1B; Q2 $5.0B |
| Guidance | No update in filings; July FY NII ex Markets ≈ $96.5B, on track | FY NII ≈ $50B and expense ≈ $55.7B kept; new Q4 NII ≈ $13B | None; multi-year targets unchanged (ROE 14% to 16%) | Expects to beat the 2026 RoTCE target of 10% to 11% |
Consumer losses are falling. All three banks with large card businesses report lower card losses than a year ago (JPM, WFC, C). Nonaccrual loans declined to $7,060M from $7,614M (WFC) and to $3,254M from $3,678M (C). Commercial real estate did not get worse either: net charge-offs of $107M, the same as a year earlier (WFC).
Reserves are rising even though losses are low. JPM, WFC and C all set aside more in the third quarter than they wrote off. At JPM the allowance for lending-related commitments rose to $5,610M from $2,964M. At GS the provision came from impairments on wholesale loans.
The banks see the risk in companies rather than households. That is an early warning, not a crisis. If they were seeing stress in their books, net charge-off rates would already be rising. At JPM, WFC and C they fell.
Growth is coming from volume. Loans and deposits are growing at or near double digits. Deposits rose 8% (JPM, average), 11% (WFC, average) and 9% (C, period end). JPM names "lower rates" as a drag on net interest income, and WFC reports a narrower margin.
Policy rates have come down and the banks are making up for it with volume. Net interest income has less upside than in the high-rate years, but it has not broken down.
Higher rates are weighing on capital. JPM's accumulated other comprehensive loss widened to $19.8B from $7.7B at June 30. At WFC, "higher interest rates" cut the CET1 ratio by 38 basis points from Q2 through AOCI. C names unrealized losses on securities as a drag.
Short-term rates down, long-term yields up during the quarter. That points to a steeper yield curve. The reports do not give actual yield levels.
Capital markets are strong, with the peak probably in Q2. Equities trading and wealth management are strong at all four banks: AUM of $5.2T, up 13%, with $263B of client asset net inflows (JPM), record assets under supervision of $4.10T (GS), Wealth revenue +15% (C) and Wealth & Investment Management revenue +12% (WFC). GS reports record Equities financing revenue of $3.37B, nearly double the year ago level.
High Equities financing revenue means institutional clients are running a lot of borrowed money. That supports prices, but it also makes the market more fragile if those positions have to be cut.
Buybacks are shrinking. Three banks lost CET1, and three returned less capital than in the second quarter (JPM, WFC, C; the GS report gives no comparison). The CET1 declines came from growing risk-weighted assets (JPM +2.4% vs Q2, calculated; GS $817B from $791B) and from AOCI.
The economy is growing, companies and households are borrowing, and losses are low. Banks are getting more careful but do not see a downturn. Capital markets stay busy, just below the second-quarter pace, which at GS was a record quarter.
Why: loan growth of 10% to 12% (JPM, WFC, C), falling loss rates, reserve builds of moderate size ($46M to $539M), and EPS well above last year at all four banks. At JPM and C, EPS was below Q2; JPM's Q2 was inflated by the Visa gain, and the reports give no Q2 EPS for WFC or GS.
The reserve builds were pure caution and credit stays clean. WFC delivers the ≈ $13B of Q4 net interest income it guided to, loan growth lifts revenue broadly, and the deal backlog refills.
The wholesale reserve builds are the first step of a credit cycle. At the same time the capital markets boom fades and higher long-term yields press on valuations.
Robust. Falling losses, card spending up 10% (JPM), more auto loans (WFC). Caveat: big-bank customers skew toward higher incomes, and subprime borrowers are barely visible in these numbers.
The reports point to lower policy rates ("lower rates" at JPM). Nothing in the numbers pushes the Fed to cut faster: no credit stress and strong loan demand. Rising long-term yields are more an issue for the bond market than for the Fed.
Fundamentally strong, but two tailwinds are fading: buybacks and very high trading revenue. EPS growth will have to come more from revenue. Valuations and share price reactions are not in the reports.
No direct data. Indirectly positive: no deterioration in commercial real estate (WFC) and lower policy rates. Indirectly negative: higher long-term yields also raise their unrealized losses.
Supported by rising card spending and low losses. The only warning sign is flat card revenue at C, which is segment revenue, not customer spending.
The bank picture argues against a near-term recession and for broad earnings growth. The risks for the index lie more in rates (long-term yields) and positioning (heavy leverage in equity financing) than in the real economy.
Next reports: Bank of America and Morgan Stanley, for consumer credit and for trading and wealth, then the regional banks.
| Metric | Confirms the base case | Tips toward the bear case |
|---|---|---|
| Wholesale reserve builds | Stay at a few hundred million dollars | More banks cite wholesale or macro, and amounts rise |
| Card charge-offs | Stay below last year (JPM July outlook ≈ 3.2%) | A first bank reports a year over year increase |
| IB backlog | Other banks report a stable or rising backlog | MS and BAC also report a decline, like GS |
| Equities and financing | Revenue holds at a high level | A sharp drop from Q3, a sign of deleveraging |
| AOCI and CET1 | CET1 stable | More pressure from long-term yields, buybacks fall further |
| Q4 net interest income | WFC reaches ≈ $13B, JPM confirms its full year outlook | NII outlooks are cut |
Are the wholesale reserve builds at the big banks a precaution, or the first page of a corporate credit cycle?
Overall: the picture on credit quality, loan growth and capital is solid, with three or four banks pointing mostly the same way (GS has no credit data, and C's CET1 was flat). For the short-term market reaction and the rate outlook, this read is of limited reliability.