Four factors that drove banks’ blowout 2Q performance

• Key insight: The start of earnings season was full of good news for banks: strong credit quality, robust loan growth, hefty profits from the capital markets business and upbeat assessments of the macroeconomic environment.
• Supporting data: Fifteen banks with more than $100 billion of assets each reported their second-quarter earnings last week, and 14 of them beat analysts’ consensus earnings-per-share estimate.
• Expert quote: “Look, the economy is strong, and people are spending money,” PNC Financial Services Group CEO Bill Demchak

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It wasn’t quite a perfect record, but last week, the big banks went 14 for 15.

Fifteen banks with at least $100 billion of assets each reported their second-quarter earnings between Tuesday and Friday, and 14 of them beat the consensus earnings-per-share forecast of analysts surveyed by S&P Capital IQ.

Cincinnati-based Fifth Third Bancorp was the only bank above the $100-billion-asset threshold that fell short. And just barely missed —  reporting earnings per share of 83 cents were a penny shy of the consensus estimate of 84 cents.

“Broadly speaking, earnings exceeded expectations,” concluded Michael Rose, an analyst at Raymond James. In a research note, he pointed to stronger-than-expected net interest income and stable-to-improving credit trends, which more than offset modest pressure to banks’ net interest margins.

Rose also cited “favorable capital markets conditions,” which helped propel the megabanks in particular.

What follows is a look at four factors that drove the industry’s exceptionally strong performance between April and June.

Capital markets

The outperformance was even stronger at the top 10 banks thanks in large part to off-the-charts performances from the biggest banks’ capital markets businesses. Initial public offerings such as the SpaceX IPO, the largest on record, played a significant role.

Goldman Sachs had been expected to report earnings-per-share growth of about 33% compared to a year ago, according to a consensus of analysts surveyed by S&P Capital IQ. Instead, the Wall Street giant beat its year-ago EPS by 92%.

At Morgan Stanley, the expectation had been for EPS growth of around 38%. It delivered EPS growth of around 63%.

At Citi, the gap between expected and actual EPS growth was 21 percentage points, according to Jonathan Golub, an analyst at Seaport Research Partners. At Wells Fargo, the gap was 17.5 percentage points. And at JPMorganChase, it was 16.3 percentage points.

Theresa Paiz Fredel, senior director at Fitch Ratings, noted in an email that a “meaningful portion of the quarter’s outperformance was market-driven rather than spread generated.” She said that the “sustainability of these earnings will depend on the durability of capital markets momentum and broader economic conditions.”

Loan growth

Strong loan growth has so far been a prominent feature of banks’ second-quarter earnings reports. At the banks that have reported, commercial growth was generally robust. Retail portfolios also expanded, as consumers continued spending despite persistent inflation and ongoing macroeconomic uncertainty.

Bank of America reported 8% growth in average loans. While the expansion was more pronounced in the commercial portfolio, which rose 11%, Bank of America also reported growth in credit cards, mortgages and auto lending. 

The story at Minneapolis-based U.S. Bancorp was broadly similar with strong growth in average commercial loans — up 14.1% — accompanied by solid consumer growth. 

Pittsburgh-based PNC Financial Services Group reported double-digit average loan growth. Meanwhile, solid loan growth led M&T Bank Corp. in Buffalo to increase its full-year lending target by $1 billion. 

Smaller banks also benefited from the loan-growth trend. The $7 billion-asset Community Trust Bancorp in Pikeville, Kentucky, reported 9% growth. The $3.2 billion-asset Unity Bancorp in Clinton, New Jersey, reported 12% growth. 

Meanwhile, Home BancShares, a $24.7 billion-asset lender based in Conway, Arkansas, said that it approved $350 million in loans at a single loan committee meeting on Wednesday.

“I knew those things were coming — I didn’t know they were coming this quarter,” CEO John Allison said Thursday on a conference call with analysts.

Asset quality

Credit quality was another bright spot.

San Francisco-based Wells Fargo reported sizable declines in both commercial and consumer net charge-offs. On the consumer side, Chief Financial Officer Mike Santomassimo noted that there’s vulnerability to inflation and a potential energy shock, but he added that the immediate forecast remains positive. 

“Consumer trends and resilience have been very strong,” Santomassimo told reporters last week. “It’s hard to see that changing in the short-term.”

Similarly, Charlotte, North Carolina-based Bank of America and Citizens Financial Group in Providence, Rhode Island, reported lower net charge-offs from second-quarter-2025 levels.

“The credit outlook remains positive, though we continue to carefully monitor the macroeconomic environment,” Aunoy Banerjee, chief financial officer at the $234 billion-asset Citizens, told analysts on Thursday.  

At the $51 billion-asset F.N.B. Corp. in Pittsburgh, both net charge-offs and nonperforming loans declined from last year. Meanwhile, the Charlotte-based Truist Financial reported a sizable linked-quarter decline in net charge-offs after consecutive quarterly increases.

Macroeconomic outlook

In the earnings calls held since Donald Trump returned to the White House, banks have often described the macro environment as uncertain or chaotic, while reassuring investors that they know how to navigate their way through it.

This quarter was different. In the second quarter, executives said, banks performed well not in spite of the economy, but because of it.

“Look, the economy is strong, and people are spending money,” Bill Demchak, the CEO of PNC Financial, told analysts. 

In call after call, CEOs and CFOs extolled robust consumer spending, newly unclogged M&A pipelines and a rush of new IPOs related to artificial intelligence. Geopolitical conditions seemed to improve as well: From April through June, the war in Iran appeared to be wrapping up (though fighting has since resumed), and the introduction of new tariffs slowed to a trickle.

It was a quarter when uncertainty, a condition that was lamented so often in previous calls, seemed to be declining.

“The economic backdrop remains very constructive,” Bank of America CEO Brian Moynihan told investors last week. “Overall, the U.S. economy has proved more durable than expected, supported by the strong consumer, ongoing AI-driven investments across the board and easing energy costs.”

JPMorganChase CEO Jamie Dimon made a similar assessment, saying the economy had “demonstrated notable resiliency this year.” Like Moynihan, he attributed this strength partly to the AI boom, but also to “fiscal stimulus and the benefits of more efficient regulation.”

Can the good vibes last? Fifth Third CEO Tim Spence pointed out that on the Iran front, July has already seen some “retrenchment” as fighting has resumed. But the confusion over the Trump administration’s tariffs remains “settled,” he said, and commercial clients’ “confidence is up on a pretty broad basis.”

Demchak also pointed out another factor: After six quarters under Trump 2.0, businesses are simply learning to work through the noise.

“People are otherwise used to the chaos in the environment and have figured out that they need to operate through it and grow,” he said.