Wall Street's biggest banks just delivered some of their strongest trading quarters ever, yet investors remain hesitant, leaving bank stocks struggling to gain traction despite headline-beating results.
Goldman Smashes Trading Records
Goldman Sachs Group Inc. (NYSE:GS) blew past expectations for equities trading revenue, setting an all-time Wall Street record.
The bank reported $4.31 billion in equities trading revenue for the final quarter of last year. That marked the highest such figure ever posted by any bank.
Goldman reported earnings per share of $14.01, sharply beating the $11.48 consensus estimate. Revenue came in at $13.45 billion, slightly below the $13.9 billion estimate.
Global Banking and Markets revenue reached $10.41 billion, topping expectations of $9.27 billion. Investment banking revenue rose 25% year over year to $2.58 billion.
Assets under management climbed to $3.61 trillion, above the $3.52 trillion estimate. Total deposits increased 2.2% quarter over quarter to $501 billion.
The bank also raised its quarterly dividend to $4.50 per share from $4.00.
Despite the blockbuster trading numbers, Goldman shares traded 1% lower in premarket action Thursday.
Morgan Stanley Also Beats, Stock Rises Modestly
Morgan Stanley (NYSE:MS) delivered another solid quarter, driven by strength in equities trading and wealth management.
The bank posted earnings per share of $2.68, beating estimates of $2.41. Revenue totaled $17.89 billion, topping the $17.6 billion consensus.
Equities sales and trading revenue reached $3.67 billion, above expectations of $3.55 billion. Wealth management revenue came in at $8.43 billion, also beating estimates.
Total deposits rose to $415.52 billion, exceeding forecasts. The board declared a quarterly dividend of $1.00 per share.
Morgan Stanley shares rose 1.8% in premarket trading.
Why Bank Stocks Are Still Lagging
According to veteran market strategist Ed Yardeni, the sector's negative stock reaction this week reflects a classic "buy-the-rumor, sell-the-news" dynamic.
Yardeni highlighted that diversified bank earnings benefited from solid borrowing activity, stable credit quality, rising assets under management and strong trading volumes.
But bank stocks surged more than 32% in 2025, setting the bar high heading into earnings season.
So far this year, the Financial Select Sector SPDR Fund (NYSE:XLF) is down 1.3%, trailing the broader S&P 500.
Looking ahead, Yardeni remains constructive on the sector, expecting diversified banks to deliver 10.9% earnings growth this year, following 10.5% growth in 2025, once regulatory overhangs ease.
Two policy risks are increasingly dominating investor focus.
First, banks are pushing back against proposals that would allow stablecoin issuers and affiliates to pay interest-like "rewards" without being subject to bank-level regulation.
The American Bankers Association warned lawmakers that such a loophole could divert $6.6 trillion in deposits away from the traditional banking system.
Second, President Donald Trump's proposal to cap credit-card interest rates at 10% has sparked concern across the industry.
“Banks' wagons are officially circled,” Yardeni said.
Executives at major banks, including Jamie Dimon, warned that such price controls could restrict access to credit, particularly for subprime borrowers, and ultimately hurt consumers and economic growth.
Dimon said the proposal would have a "dramatic" effect on subprime borrowers. Executives at Citigroup Inc. (NYSE:C), Bank of America Corp. (NYSE:BAC), and Wells Fargo Co. (NYSE:WFC) agreed affordability is a concern, but limiting rates is not the solution.
For now, Wall Street's trading desks are thriving. Investors just aren't ready to chase bank stocks higher.
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