Khan Capital | April 2026
Key Takeaways
- Trading desks carried the quarter. JPMorgan fixed-income trading rose 21% to $7.08bn, Morgan Stanley equities hit a record $5.15bn, and Wells Fargo markets revenue grew 19% year on year. The Iran war, oil shock, and hawkish repricing of the Fed were a gift to dealer P&L.
- Investment banking has re-opened. Bank of America IB fees rose 21%, Morgan Stanley IB climbed 36%, and JPMorgan booked a 28% jump. M&A, equity underwriting, and delayed IPOs, including the SpaceX filing, have reawakened the fee engine after an 18-month drought.
- Net interest income is quietly compressing. JPMorgan cut its full-year NII outlook from $104.5bn to roughly $103bn, Wells Fargo reported NII down 2% quarter on quarter, and guidance across the Big Four skewed cautious. Traditional spread banking is past peak.
- BlackRock confirms the asset-gathering flywheel. Assets under management rose 20% year on year to $13.8 trillion, revenue beat consensus at $6.7bn, and private-markets and ETF flows offset softer traditional active. Scale is the moat.
- The market reaction is muted relative to the numbers. Bank share prices traded flat to modestly down on the week despite blowout results, reflecting investor concern that the March CPI shock and Strait of Hormuz blockade will weigh on credit quality and consumer spending in coming quarters.
A Volatility Quarter That Rewarded the Right Desks
The first-quarter 2026 bank earnings season opened this week with results that, taken in isolation, would have been read as a clean beat for the American banking sector. Every one of the six large US franchises that reported between 14 and 16 April topped consensus earnings per share. Trading revenues across equities and fixed income were at or near records. Investment banking, moribund for much of 2024 and 2025, came back with authority. And yet the share-price reaction was curiously restrained: the KBW Bank Index finished the week roughly flat, and names like JPMorgan and Wells Fargo traded lower on the print despite upside surprises.
The dissonance between headline beat and price action is informative. The quarter that just closed was shaped almost entirely by volatility: the US-Israeli strikes on Iran in late February, the closure of the Strait of Hormuz through much of March, the hawkish Fed pivot that emerged from the March FOMC minutes, and the repricing of the Treasury curve as rate-cut expectations evaporated. For trading desks, these conditions produced something close to an ideal environment: wide bid-ask spreads, elevated customer flow, and a rare alignment across asset classes. For the lending book, those same conditions mean a fatigued consumer, softer deposit growth, and the early signs of net interest margin compression.
This note steps through what each of the six major US banks reported, what their Q1 2026 bank earnings tell us about the underlying franchise economics, what the market appears to be underappreciating, and how institutional investors might reasonably think about positioning across the financials complex from here.
The Numbers at a Glance
Before parsing individual franchises, it is worth laying out the headline results side by side. The breadth of the beats matters: every franchise delivered earnings above consensus, and the principal source of upside was almost universally the same.
| Bank | Q1 2026 EPS | Consensus | Revenue | Key Driver |
|---|---|---|---|---|
| JPMorgan Chase | $5.94 | $5.45 | $50.54bn | FICC trading +21%, IB fees +28% |
| Citigroup | $3.06 | $2.67 | $24.60bn | Markets revenue, services strength |
| Wells Fargo | $1.60 | $1.58 | $21.45bn | Markets +19% YoY, NII soft |
| Bank of America | $1.11 | $1.01 | $30.30bn | IB fees +21%, trading strength |
| Morgan Stanley | $3.43 | $3.00 | $20.58bn | Equities +25% record, IB +36% |
| BlackRock | $12.45 | $11.85 | $6.70bn | AUM $13.8tn (+20% YoY) |
The consistency of the beat pattern, ranging from $0.10 above consensus at Wells Fargo to $0.49 at JPMorgan and $0.43 at Morgan Stanley, points to a common upside source rather than idiosyncratic execution. That source is the trading and capital-markets business.
JPMorgan and Citigroup: Fixed Income Becomes the Hero Again
JPMorgan’s quarter will stand as a reminder of what scale in global markets looks like in a volatility regime. Fixed-income, currencies, and commodities (FICC) revenue rose 21% year on year to $7.08bn, with rates, FX, and credit all contributing. Equities trading was softer in relative terms but still grew, and investment banking fees leapt 28% to $2.88bn as the IPO pipeline began to unfreeze around the SpaceX filing and a tranche of delayed technology listings.
The market caveat is that JPMorgan simultaneously trimmed its full-year net interest income guidance from $104.5bn to approximately $103bn. The $1.5bn cut is not catastrophic in the context of a franchise of this size, but it is directional. Jamie Dimon reiterated on the call that deposit costs remain sticky, consumer borrowing is normalising, and the commercial book is seeing tighter credit standards. The bank is, in effect, telling investors that the 2024-2025 NII super-cycle has peaked.
Citigroup’s print was in many ways the more notable result given its long restructuring narrative. Revenue of $24.6bn was up year on year, net income came in at $5.8bn, and markets revenue, the segment that has historically flattered itself with volatility, delivered again. Services (the transaction-banking business that Jane Fraser has been emphasising as the crown jewel) continued to compound at double-digit rates. For the first time in several quarters, investors are having to take seriously the possibility that the Citi turnaround thesis has substantive support in the numbers.
Morgan Stanley’s Record Quarter: Equities Trading and the Wealth Engine
Morgan Stanley produced the cleanest print of the week. Record total revenue of $20.58bn, record earnings per share of $3.43, record wealth management revenue of $8.52bn, and a record $5.15bn in equities trading revenue: a 25% year-on-year increase that was roughly $450m above consensus. Fixed-income revenue rose 29% to $3.36bn, and investment banking fees surged 36% to $2.12bn.
Two observations matter here. First, equities trading revenue has become structurally larger at Morgan Stanley than at any other American bank, a legacy of the post-crisis decision to build out the prime brokerage and derivatives franchise. In a week where the tech-led volatility episode from early 2026 continued to generate hedging demand, and where long-short hedge funds repositioned aggressively around the oil shock, that franchise scaled efficiently.
Second, the wealth management business, often dismissed as a low-growth annuity, grew revenue 16% year on year. Net new assets continue to run at levels that imply the James Gorman-era integration of E*TRADE is delivering a structurally higher growth rate than the bank’s legacy private wealth business. With market volatility lifting fee-based advisory asset values and client activity levels, wealth is doing the opposite of what it did in the 2022 drawdown: it is compounding, not stalling.
Bank of America and Wells Fargo: The NII Compression Story
Bank of America delivered a cleaner result than many expected, with revenue of $30.3bn and EPS of $1.11 beating the $1.01 consensus. Investment banking fees jumped 21% on a combination of M&A advisory, delayed IPO issuance, and a resurgence in leveraged finance around private-credit refinancings. But Bank of America’s earnings quality depends more than peers on the securities book: the bank continues to run a large held-to-maturity portfolio that has embedded losses, and the shape of the yield curve still determines the pace at which that portfolio reprices.
Wells Fargo is where the NII compression is most visible. EPS of $1.60 beat consensus by a cent, but revenue of $21.45bn missed the $21.76bn estimate. Net interest income fell 2% sequentially, driven by two fewer days in the quarter and what the company described as “lower rates” on deposit repricing. Markets revenue grew 19% year on year and 38% quarter on quarter, a notable jump given Wells’s historically modest trading franchise, which suggests the bank is capturing incremental client flow as it emerges from its asset-cap constraints. But the core spread business that traditionally drove Wells earnings power is being ground down, and the company’s $50bn NII guide for the full year now looks like a ceiling rather than a midpoint.
BlackRock: The $13.8 Trillion Flywheel
Not strictly a bank, but the BlackRock print belongs in the same conversation because it speaks to where fee-generation economics in financial services are structurally migrating. Assets under management rose 20% year on year to $13.8 trillion. Revenue of $6.7bn beat the $6.4bn consensus, and adjusted net income grew 17% to $2.07bn. Management reiterated that private-markets AUM, boosted by the integration of alternative-asset acquisitions made during 2024 and 2025, is now meaningfully contributing to fee growth.
What is striking is that BlackRock achieved this even in a quarter where the S&P 500 posted its worst first quarter since 2022, a period previously detailed in our Q1 correction wrap-up. The flywheel of index ETFs, technology licensing through Aladdin, and private-markets fee streams insulated the business from the directional beta drag. For investors thinking about where durable fee economics sit in the financials complex, BlackRock offers a useful benchmark: it is increasingly difficult to dislodge.
The Cross-Cutting Theme: Volatility Pays, Lending Doesn’t
Reading the six releases together, the sector is bifurcating along a clearer line than at any point since 2020. Capital-markets-heavy franchises, JPMorgan’s CIB, Morgan Stanley, and Goldman Sachs (which reports next week), are compounding faster than the market has been pricing. Deposit-and-lending-heavy franchises, particularly the super-regional universe that reports over the next fortnight, are running into net interest margin gravity that will take several quarters to resolve.
Two structural factors are driving this. First, the Fed’s decision to hold rates through the March meeting has, combined with rising long-end Treasury yields, pushed the curve into positive territory without delivering meaningful relief to deposit costs. Banks are paying up for deposits while seeing loan demand soften. Second, market volatility has been persistently elevated: the VIX averaged over 22 through Q1, two-year Treasury yields moved in an 80-basis-point range, and oil realised volatility ran at levels not seen since 2022. That is the literal revenue model of a large dealer.
What the Market Is Underappreciating
The muted share-price response to strong prints is instructive. Three things appear to be weighing on sentiment that are worth unpacking because they are not, in our view, fully calibrated.
The first is the concern that trading revenue is inherently unrepeatable. That is half true. Record trading quarters are followed by quieter ones, and no analyst should extrapolate Q1 into a full-year run-rate. But the steady-state level of trading revenue at the larger franchises has stepped up since 2022, reflecting a combination of higher volatility regimes, wider product mandates (commodities, crypto-adjacent flow, structured credit), and market-share gains against European competitors that continue to retrench. The denominator from which “quieter quarters” are measured is materially higher than it was five years ago.
The second is the concern that the consumer credit cycle is turning. Non-performing loan metrics at the large banks remain benign, but forward-looking indicators are less reassuring: credit card charge-offs are rising from a low base, auto-loan delinquencies have been creeping up, and the March CPI shock (if energy prices fail to moderate) will compress real disposable income further. This is a risk to the lending book over the next three to six quarters, but it is mostly priced into current reserve ratios.
The third, and most underappreciated, is that the investment-banking recovery is likely to be more durable than consensus has allowed. After two years in which M&A volumes ran well below long-run averages, there is a substantial backlog of strategic transactions that needed only stabilised rates and a functioning IPO window. Both now exist: the SpaceX filing, the reopening of mid-cap equity capital markets, and the return of leveraged finance around private-credit refinancings all point to a cyclical upswing in fee income that should extend into 2027. Consensus 2026 IB fee estimates for the industry still imply a modest recovery, not the cycle inflection that the Q1 data suggests.
Investor Implications
The institutional implications of this earnings season run across asset classes. The framing below is analytical rather than prescriptive; positioning decisions depend on individual mandates, risk budgets, and existing exposures.
Equities
The bifurcation between capital-markets-heavy and NII-sensitive franchises argues for a dispersion trade within financials rather than a blanket sector call. Investors positioning inside the complex may wish to consider that the market-sensitive banks (JPMorgan CIB, Morgan Stanley, Goldman Sachs) are trading at multiples that do not yet reflect a structurally higher run-rate for trading and investment banking, while the pure-play NII exposures (super-regionals, certain consumer-heavy names) face a more challenging forward curve. Within the asset-manager complex, BlackRock’s scale advantage in ETFs and private-markets integration continues to compound, and smaller traditional active managers face a structural headwind that this quarter did not alleviate.
Fixed Income
The Treasury un-inversion and the retreat of rate-cut expectations have reset the duration calculus. Bank senior debt and subordinated paper have traded relatively well through the volatility episode, and spreads over Treasuries have tightened modestly despite the macro stress. This argues for cautious optimism on bank credit, particularly at the GSIB level where capital ratios remain well above regulatory minima. The more interesting question is whether the recent widening in some super-regional credit spreads is an opportunity or a warning: the Q1 data suggests the latter for the weakest names, but the better-run super-regionals are pricing at levels that may be over-stressed.
Cross-Asset Positioning
The broader takeaway is that volatility itself has become a durable risk premium. Investors with the mandates to do so may wish to consider that dealer revenues, alternative-asset-manager fee streams, and exchange volumes are all structurally geared to a higher-volatility regime. For portfolios with binary exposure to “rates higher” or “rates lower” outcomes, the capital-markets franchise provides a cleaner way to participate in elevated volatility without making a directional rates bet. The analytical framing: financials are no longer a pure rate-beta trade; they are increasingly a volatility-beta trade with rate sensitivity at the margin.
Conclusion
The Q1 2026 bank earnings season has delivered what might be described as a quarter of two franchises. On one side: trading desks, investment banking teams, and scale asset managers riding a volatility regime that has been unusually generous to fee-based businesses. On the other: the traditional net interest margin story, slowly grinding lower as deposit costs linger, loan demand softens, and the prospect of Fed cuts recedes. The market’s flat-to-down response to strong prints reflects a justified concern that the credit cycle is maturing and that a re-accelerating inflation narrative could complicate the forward outlook. But it also reflects, we think, an underappreciation of how durable the capital-markets upswing is likely to be, and how structurally entrenched the scale advantages of the largest franchises have become.
The week’s prints were not a one-off. They were a data point consistent with a regime in which volatility is high, deal activity is recovering, private-markets fee streams are scaling, and the lending book is slowly plateauing. That combination argues for a more dispersed, franchise-level view of the financials complex than either the sector indices or most single-factor strategies capture.
Sources: CNBC JPMorgan Q1 2026; CNBC Morgan Stanley Q1 2026; CNBC Bank of America Q1 2026; Quartz Wells Fargo Q1 2026; InsiderFinance Citigroup Q1 2026; FactSet Financials Preview; CNBC March 2026 CPI; Treasury Un-Inversion Analysis.
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Related Reading: For context on the volatility environment that shaped these results, see our analysis of Q1 2026: The Worst First Quarter Since 2022 and the Fed’s hawkish pivot in the March minutes. On the geopolitical backdrop driving trading activity, see Oil Above $100: Strait of Hormuz Closure and Fed Holds Amid Iran War. For the broader theme of volatility driving financial-services fee streams, our earlier note on Tech Volatility in 2026 may provide useful perspective.
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