Big banks' big problems

When markets are climbing and everyone’s trading, it’s usually a good sign for big banks. On paper, that remained true last quarter: JPMorgan, Bank of America, Citigroup, and Wells Fargo collectively brought in $28.5 billion in profits in Q4 and $123.2 billion for the full year, a 5% increase from 2024.

But in our current trick mirror economy, it’s not that simple. Despite a roaring stock market and a push from Washington to deregulate financial products, many of Wall Street’s top dogs just stumbled after reporting quarterly earnings this week.

Banks have 99 problems

There wasn’t just one culprit, but a slew of unfortunate events that created a perfect storm for big banks.

The White House’s presence in the economy is inescapable these days, and President Trump’s interventionist policies were a huge discussion point during earnings calls—particularly his proposed 10% cap on credit card interest rates. Management at Wall Street firms took earnings calls as an opportunity to hammer the idea, noting that such a cap would hurt their bottom lines.

But beyond the broad policy environment, there were a slew of snafus. JPMorgan struggled with a slowdown in its investment banking business, while Wells Fargo had its worst day in six months after the bank reported disappointing profits, partially because of a stagnant housing market that hurt its mortgage lending business.

Meanwhile, Goldman Sachs reported its first revenue decline in nine quarters thanks to its Apple Card debacle, while Bank of America was burned by a very modern problem: Its highly touted AI assistant, Erica, failed to attract more users last quarter.

Other problems were more basic: Running a bank is just plain expensive. Citigroup reported a 13% quarterly profit decline in Q4 due to rising expenses as it continues its banking overhaul.

The silver lining: Despite the mixed bag of various setbacks, banks maintained that they did not see a downturn in consumer spending. That was particularly true for banks with wealthier customer bases, like Goldman Sachs and Morgan Stanley—both of which beat earnings expectations while their peers largely fell short, and both of which hit new 52-week highs today.

Overall, Wall Street remains bullish on 2026, predicting a return of dealmaking, IPOs, and a continued trading boom. For that reason, these bellwethers aren’t ringing any alarm bells about the economy quite yet.—LB