Wall Street's biggest banks entered the second half of 2026 facing a slowdown in capital-markets activity, as weaker dealmaking momentum and uneven trading results interrupted a strong first half. Third-quarter earnings released October 13–14 showed that investment-banking activity had cooled, even as several major institutions continued to report substantial profits.
The results from JPMorgan Chase, Goldman Sachs, Morgan Stanley, Citigroup, Bank of America and Wells Fargo highlighted the contrasting forces shaping U.S. banking. According to a Reuters assessment published October 15, rising Treasury yields, volatile artificial intelligence-related investments and geopolitical uncertainty contributed to delayed mergers, acquisitions and initial public offerings.
JPMorgan and Bank of America missed analysts' profit expectations, while the other four banks exceeded forecasts. Yet the broader picture was more complicated than a simple downturn: equities trading, wealth management and consumer lending provided important support, exposing substantial differences between the banks' business models.
Investment Banking Loses Momentum After Strong First Half
The clearest evidence of slowing momentum emerged in investment-banking fees, which banks earn from advising on mergers and acquisitions and helping companies raise money through stock and bond offerings.
JPMorgan Chase reported approximately $3 billion in third-quarter investment-banking fees, representing a 14% increase from the same period in 2025 but an 8% decline from the second quarter of 2026. The contrasting comparisons illustrate how activity can remain stronger than a year earlier while losing momentum from the preceding quarter.
Goldman Sachs recorded $3.22 billion in investment-banking fees, up 21% year over year but down 5% sequentially. Its advisory business benefited from completed mergers and acquisitions, although the firm's reported investment-banking fee backlog declined from the second quarter.
Citigroup showed a similar pattern. Its third-quarter financial results put investment-banking revenue at $1.35 billion, a 13% decline from the previous quarter but a 9% increase from a year earlier. Bank of America experienced a broader decline, reporting $1.8 billion in corporation-wide investment-banking fees, excluding self-led transactions, down 11% year over year.
Morgan Stanley offered another illustration of the uneven market. Its investment-banking revenue increased 2% from the prior-year quarter to approximately $2.16 billion, supported by advisory activity, even as equity underwriting revenue declined 19%.
These figures do not establish an industrywide collapse. Instead, they show a loss of momentum after the strong first half, with individual banks experiencing different combinations of advisory, underwriting and financing activity.
The distinction matters because investment-banking revenue is tied partly to the timing of completed transactions. A company may postpone an IPO or acquisition without abandoning it, but banks generally cannot recognize the associated transaction fees simply because a deal remains in their pipeline.
Trading and Lending Help Offset Weaker Dealmaking
While investment-banking activity slowed, equities trading remained a major source of strength. Increased client activity, portfolio adjustments and demand for hedging helped several banks generate substantial trading revenue. Fixed-income businesses, however, generally faced more difficult conditions.
Goldman Sachs reported $6.44 billion in equities revenue, a 72% increase from the third quarter of 2025. Its fixed-income, currency and commodities revenue was approximately $3.47 billion, essentially unchanged year over year but down 24% from the preceding quarter.
JPMorgan's equity markets revenue climbed 49% year over year to approximately $5 billion, while its fixed-income markets revenue declined 4% to $5.4 billion. The contrasting results demonstrate how different trading desks can respond differently to the same period of market uncertainty.
Morgan Stanley's earnings release showed a comparable divergence. Equity trading revenue increased 41% to $5.8 billion, while fixed-income revenue declined 7% to approximately $2 billion. Its wealth management division also generated record quarterly revenue of $9.1 billion, providing another source of income beyond institutional trading and investment banking.
Traditional lending operations offered additional support. Bank of America's net interest income increased 8% year over year to $16.4 billion, according to its third-quarter earnings release. However, the bank's reported net income fell to $6.9 billion from $8.3 billion a year earlier, with results including a $1.2 billion regulatory settlement charge. Excluding that charge, the bank reported adjusted net income of $8.1 billion, a non-GAAP measure.
Wells Fargo reported net income of approximately $6 billion, up 6% year over year, while average loans increased 11% to more than $1 trillion. Its diluted earnings per share rose 13% to $1.87.
Net interest income represents the difference between interest earned on assets such as loans and interest paid on funding sources such as deposits. It can help support earnings when investment-banking fees weaken, although higher funding costs, credit losses and reduced borrowing demand can limit that benefit.
Why Capital Markets Cooled in the Third Quarter
The third-quarter slowdown reflected a difficult combination of financing conditions and uncertainty surrounding corporate valuations.
Higher Treasury yields can increase borrowing costs for companies considering acquisitions, debt issuance or major investment projects. More expensive financing can make proposed transactions less attractive, particularly when potential buyers and sellers already disagree over valuations.
Monetary policy added another consideration. The Federal Reserve increased its target federal funds rate by 25 basis points in September, bringing the range to 3.75%–4.00%, effective September 17, 2026.
Inflation remained an important constraint on the interest-rate outlook. As covered in NewsFusion365's report on September's rise in U.S. inflation to 3.7%, persistent price pressures complicated expectations for future monetary-policy decisions.
Uncertainty surrounding AI-related investments also influenced market sentiment. Concerns about technology valuations, financing commitments and the sustainability of spending growth created additional questions for investors and corporate decision-makers.
Geopolitical risks further complicated planning, particularly for multinational companies considering large cross-border transactions.
None of these factors independently explains every bank's results. Their influence varies by transaction type, geography and financing structure, and the available disclosures do not establish how much of the slowdown can be attributed to any single cause.
Market volatility also has competing effects. It can discourage companies from launching public offerings while generating additional trading activity as institutional investors adjust positions or manage risk. This helps explain why investment banking and equities trading produced such different results during the quarter.
What Could Determine Wall Street's Next Quarter
The central question for Wall Street is whether weaker third-quarter investment-banking activity represents a temporary interruption or the beginning of a more sustained slowdown.
Several bank executives expressed confidence that delayed transactions had not necessarily been canceled. However, a strong advisory pipeline is not equivalent to completed deals, and expected transactions remain vulnerable to financing conditions, regulatory reviews, valuation disagreements and changes in investor demand.
Four developments will be particularly important in assessing the outlook: whether postponed IPOs reach the market, whether announced mergers progress toward completion, whether financing costs stabilize, and whether equities trading continues to compensate for weaker activity elsewhere.
Investors will also examine subsequent earnings guidance and the direction of net interest income. Higher rates may support certain lending margins, but prolonged borrowing-cost pressures can also weaken credit demand and increase financial strain on businesses and households.
The third-quarter results therefore present a mixed picture rather than a uniform deterioration. JPMorgan and Bank of America encountered earnings disappointments, while Goldman Sachs, Morgan Stanley, Citigroup and Wells Fargo demonstrated varying degrees of strength across their businesses.
For Wall Street, the next test will be whether corporate dealmaking begins converting delayed transactions into completed business. Until then, strong trading results and resilient lending activity may help sustain profits, but they cannot eliminate the industry's exposure to changing capital-market conditions.
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