Big banks’ Q1: trading triumph, lending anxiety—how Trump's tariffs shaped earnings
By Jacob Falkencrone, Global Head of Investment Strategy at Saxo
Wall Street’s giants have delivered their first-quarter reports amid the whirlwind of Donald Trump’s aggressive tariff strategy and mounting recession fears. At first glance, banks rode a wave of market volatility to extraordinary trading profits, but a closer look reveals caution and uncertainty simmering beneath the surface.
Trump’s tariff-induced market swings generated nearly USD 37 billion in trading revenues across America's biggest banks—their strongest quarter in more than a decade. JPMorgan set records with equity trading revenue surging 48%, Goldman Sachs claimed the crown with USD 4.19 billion in equities revenue, and Morgan Stanley also soared, increasing equities trading by 45%. Bank of America and Citi added to the chorus, both posting substantial gains in equities as investors repositioned in response to turbulent market conditions.
Yet investors should be cautious. These remarkable trading revenues reflect temporary volatility, not necessarily sustainable strength. They tell only part of the larger economic story.
Beneath the surface: lending and dealmaking signal concern
In sharp contrast to trading euphoria, banks saw troubling signs in lending and dealmaking activities. Wells Fargo missed earnings estimates as weak loan demand signaled increasing caution among consumers and businesses. Goldman Sachs saw an 8% drop in investment banking revenue, as companies delayed mergers and IPOs amid economic uncertainty.
Even banks reporting consumer resilience expressed careful optimism. Bank of America noted solid credit quality and a modest 4% rise in consumer spending , while Citi achieved record revenue in personal banking but significantly increased loan-loss provisions as a precaution against future distress.
Wall Street CEOs cautiously navigate the storm
Bank executives struck careful tones in earnings discussions. JPMorgan’s Jamie Dimon warned explicitly of "considerable turbulence," highlighting geopolitical tensions and trade uncertainties. Goldman’s David Solomon suggested investors pause until greater policy clarity emerges, reflecting industry-wide anxiety. Citi CEO Jane Fraser celebrated strong current results but echoed caution around Trump’s unpredictable tariff policy.
This collective voice of caution should remind investors that despite immediate gains, long-term economic confidence remains fragile.
The big picture: what investors need to know
The banks’ mixed results clearly highlight three key points for investors:
- Record trading profits driven by volatility are impressive but inherently short-lived.
- Cautious lending and stalled corporate deals indicate deeper underlying economic concerns.
- Bank executives’ warnings underscore genuine uncertainty about future growth prospects.
Investing amid persistent uncertainty
This quarter’s bank earnings serve as a powerful reminder that beneath Wall Street’s sparkling surface lie real economic anxieties, cautious consumers, and businesses reluctant to take big risks. As Trump’s trade policies continue to unsettle global markets, investors would be wise to temper excitement over short-term gains with prudent, diversified strategies.
Patience, thoughtful diversification, and a measured approach to risk—not chasing temporary volatility-driven profits—will likely prove most rewarding. Perhaps Goldman’s David Solomon said it best: it may indeed be a time to “pause and wait for clearer skies.”
The bottom line from the big banks’ earnings is clear: Wall Street’s record trading profits mask deeper economic anxieties. For investors, this means staying prudent, diversified, and patient as the market navigates an uncertain road ahead.
