Big Banks Q2 Earnings Thrive: ETFs in Focus

Interest rates remain elevated, trade tensions remain in place, and markets have been on a wild ride — yet the largest banks of the United States continue to post strong results. While retail investors may find the volatility unsettling — particularly those needing to liquidate equities or seeking quick gains — Wall Street banks are benefiting.

In the second quarter, the five largest U.S. banks reported a collective 17% rise in trading revenues and a 7% increase in investment banking revenues compared to the same quarter last year (read: Banks Lift Payouts Amid Successful Stress Test: ETFs in Focus).

Volatility Fuels Trading Desks

For banks’ equities trading desks, volatility isn't a threat — it’s a business driver. Their profits don’t hinge on whether markets rise or fall, but on the volume and frequency of trades. As stock prices swung dramatically this quarter, banks reaped the rewards from elevated trading activity.

Retail investors may have been whipsawed by rapid market moves — reacting to everything from tariff announcements to geopolitical conflicts like Israel-Iran — but banks were there to facilitate trades and collect fees at every turn.

Diversification is Key

This quarter reinforces the resilience and flexibility of financial services firms. Whether interest rates stay high or the economy faces headwinds, diversified banking operations — from trading to investment advisory — helped banks thrive.

Trade Uncertainty Isn’t Slowing Deals

Despite ongoing tariff threats and policy unpredictability, banks report that corporate clients remain undeterred. Companies are still pursuing mergers, issuing debt and going public. Bank executives this week emphasized that strategic initiatives are moving forward, regardless of short-term trade risks.

Banking Earnings in Focus

Morgan Stanley’s (MS) second-quarter 2025 earnings per share of $2.13 handily surpassed the Zacks Consensus Estimate of $1.93. The figure also compared favorably with $1.82 per share reported in the prior-year quarter. Additionally, Morgan Stanley’s net revenues of $16.79 billion were up 12% from the prior-year quarter and beat the Zacks Consensus Estimate of $15.92 billion.

Morgan Stanley’s strong trading business performance was propelled by higher client activity, with strength in equity trading. The company’s equity trading revenues jumped 23% year over year to $3.72 billion, and fixed-income trading income was up 9% to $2.18 billion.

Similarly, the trading business led to windfall gains for Goldman Sachs GS and JPMorgan JPM. Goldman reported Q2 EPS of $10.91, beating the estimate of $9.43 and rising from $8.62 a year ago.Global Banking and Markets revenues rose 24% to $10.1B, led by equities and FICC trading strength.Goldman raised its quarterly dividend 33.3% to $4.00 per share after clearing the 2025 Fed stress test.

JPMorgan came out with quarterly earnings of $4.96 per share, beating the Zacks Consensus Estimate of $4.51 per share. This compares to earnings of $4.4 per share a year ago. Revenues of $44.91 billion topped the Zacks Consensus Estimate by 2.52%.

Wells Fargo & Company’s WFC second-quarter 2025 adjusted earnings per share of $1.54 surpassed the Zacks Consensus Estimate of $1.41. In the prior-year quarter, the company reported earnings per share of $1.33. Fee income rose 4% on a gain from the merchant services JV acquisition.

Citigroup Inc. C reported second-quarter 2025 adjusted net income per share of $1.96, up 28.9% from the year-ago period. The metric also surpassed the Zacks Consensus Estimate by 21.7%.

Bank ETFs in Focus

Against this backdrop, financials-based exchange-traded funds (ETFs), such as iShares U.S. Financial Services ETF IYG, iShares US Financials ETF IYF, Invesco KBW Bank ETF KBWB, Financial Select Sector SPDR XLF and Vanguard Financials ETF VFH should gain ahead.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research