First Major Test After Fed's 'Soft Landing'

Major U.S. banks will begin reporting their fourth quarter 2025 earnings starting January 13. This earnings season represents the first major checkpoint since the Federal Reserve successfully achieved a 'soft landing' after lowering the federal funds rate to 3.50-3.75% by the end of 2025.

Wall Street analysts view this earnings season as an 'inflection point' for the U.S. financial sector. As the two-year high interest rate environment comes to an end, banks are shifting their growth strategies from defending net interest income (NII) to expanding lending and investment banking (IB) fees.

Major Banks to Report Results January 13-14

The earnings release schedule is as follows:

• January 13 (Tuesday): JPMorgan Chase (NYSE: JPM)
• January 14 (Wednesday): Bank of America (NYSE: BAC), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C)

These banks experienced significant environmental changes throughout 2025, including a recovery in the M&A market to $5.1 trillion, surging investment banking fees, and the Fed's rate-cutting cycle as inflation approached the 2% target.

With Fed Chair Jerome Powell's term expiring in May 2026, uncertainty about future monetary policy direction has become a key focal point for this earnings season.

JPMorgan: Massive Investment Burden vs. Dominant Scale

JPMorgan solidified its industry-leading position by surpassing $10 billion in investment banking fees in 2025. Analysts expect earnings per share (EPS) of $4.87 to $5.01.

However, the bank announced plans for $105 billion in operating expenses for 2026. A significant portion will be allocated to artificial intelligence (AI) infrastructure development and integrating the Apple Card business acquired from Goldman Sachs. How CEO Jamie Dimon explains revenue growth relative to technology investments is the market's key focus.

Bank of America: Expected to Benefit from Rate Sensitivity

Bank of America projected confidence by setting a 5-7% net interest income (NII) growth target for 2026. With the most rate-sensitive structure among major U.S. banks, BAC is benefiting from recovering loan demand, with corporate lending up 13% by the end of 2025.

CEO Brian Moynihan has maintained that the yield curve's steepening in favor of long-term loans provides sufficient margin improvement potential, despite deposit rate competition pressures.

Wells Fargo: First Expansion Phase After Asset Cap Removal

Wells Fargo entered its first major expansion phase after the $1.95 trillion asset cap imposed in 2018 was lifted. This regulatory constraint resulted from the fake accounts scandal, and since its removal, Wells Fargo has actively pursued lending expansion and new customer acquisition.

The market is watching how Wells Fargo will unleash its previously suppressed growth potential and how quickly it can recover market share compared to competitors.

Market Awaits 'Aggressive Expansion' Signals

In the first week of January 2026, bank stocks showed gains outpacing the S&P 500 index, reflecting investor optimism. The market has already priced in a 'pro-growth' environment and seeks confirmation that this earnings season can support those expectations.

Key factors include NII stabilization, loan growth momentum, and investment banking fee growth based on M&A recovery. If major banks provide conservative guidance or cost increases offset revenue improvements, short-term correction pressure cannot be ruled out.

Banking Industry Trajectory: 2022-2026 Inflection Points

In 2022, the Fed declared war on inflation and rapidly raised rates. Banks enjoyed a short-term boom of net interest margin (NIM) expansion, but loan demand plummeted.

In March 2023, the Silicon Valley Bank (SVB) collapse highlighted liquidity crises at small and mid-sized banks, intensifying deposit concentration at large banks. Subsequently, the Fed maintained a 'higher-for-longer' stance, supporting bank profitability.

In the second half of 2025, as inflation stabilized and recession fears eased, the Fed implemented rate cuts. Banks now face the challenge of offsetting NII reduction pressure through loan expansion and fee income diversification.

2026 will be the year when this transformation must be proven through actual results. This is the period when banks must demonstrate that operational capabilities and technology investments translate into profits, rather than relying simply on interest rate benefits.

Future Outlook [AI Analysis]

The U.S. banking industry in 2026 is likely to experience a transition from 'defense' to 'offense'. If the Fed's rate-cutting trajectory continues, corporate lending and mortgage markets will recover, leading to loan asset growth.

Particularly, if the M&A market maintains or expands from 2025 levels, fee income for major investment banks like JPMorgan and Goldman Sachs is expected to increase further. Conversely, small and mid-sized banks may face profitability pressures due to deposit rate competition and widening scale gaps with large banks.

AI investment is expected to significantly improve the banking industry's cost efficiency and customer experience in the long term, but massive capital expenditures may burden stock prices in the short term. The technology investment-to-profitability roadmap presented by each bank during this earnings season will be a key variable influencing investor sentiment.

The possibility of Fed chair replacement also increases policy uncertainty. If a new chair returns to a tightening stance, banks' expansion strategies will require inevitable readjustment.