Large Banks Enter 2025 on a High Note

Large banks reported robust fourth-quarter 2024 earnings last week, benefiting from a resurgence in dealmaking, favorable market conditions, and a resilient economy.  

Now they’re looking to build on that momentum. With optimism for a more business-friendly environment under the Trump administration, banks are entering 2025 on solid ground—but not without risks. Here are the key takeaways from Q4 large-bank earnings: 

Investment Banking Drives Growth 

After two subdued years, investment banking surged in Q4 2024, with revenue climbing over 25% year over year for all major banks. A stronger appetite for M&A, combined with increased corporate bond issuance, fueled this rebound. Morgan Stanley noted that private equity firms still hold $3 trillion in uncommitted capital, signaling potential for sustained dealmaking in 2025. 

Mid-sized institutions mirrored these successes, leveraging investment banking and trading to counter declining loan growth. Many surpassed profit expectations, highlighting the broader upturn in the sector. 

Trading Revenue Breaks Records 

Market volatility tied to strong jobs data and the post-election environment sparked significant activity across trading desks. Fixed income and equity trading teams reported record-breaking performance, contributing to one of the most profitable fourth quarters in recent history. This resurgence in trading helped offset the impact of declining loan demand caused by elevated interest rates. 

Net Interest Income Faces Headwinds 

After driving revenue growth for much of 2022 and 2023, net interest income plateaued following the Federal Reserve’s rate cuts. If rate cuts continue, large banks will seek to adjust their revenue formulas in ways that are consistent with their risk appetites—and avoid undue risk. 

Deregulation Sparks Optimism 

Looking ahead, the Trump administration is expected to ease regulatory pressures, giving banks more flexibility to allocate capital and pursue growth strategies. In earnings calls, bank executives highlighted the potential for constructive discussions with regulators, anticipating a more business-friendly environment. However, questions remain about how longer-term economic risks, including inflation and fiscal deficits, will affect banks.