Big bank profit engines expected to roar into earnings as Main Street keeps spending

Few examples better capture the resurgence of big banks than Jamie Dimon's special retention award, which has swelled in value from over in the last five years to more than $280 million today.

As Dimon's bank, JPMorgan Chase, heads into earnings season, analysts expect the country's largest lender and its rivals to post one of their strongest quarters ever.

But the setup is leaving investors with something of a quandary: Should they cheer or doubt whether there's more room to run for big banks?

Investors are "naturally skeptical," UBS analyst Erica Najarian wrote to clients earlier in July. "It's been awhile since it's felt like 'peak bank'."

The test is coming on Tuesday. JPMorgan, Bank of America ( BAC ), Wells Fargo ( WFC ), Citigroup ( C ), and Goldman Sachs ( GS ) will all report second quarter results before the opening bell. Morgan Stanley ( MS ) will round out Wall Street bank results with numbers coming Wednesday morning.

Each firm is expected to show that second quarter profits climbed from the year-ago period, according to data compiled by Bloomberg. The hope is that the giants can show their profit engines, which roared through the first quarter, have more endurance and torque.

"We think the fundamental backdrop for banks is good," said HSBC analyst Saul Martinez. "But the quarter itself, while it could be good, I don't know that it's something that recalibrates people's expectations materially higher than what they are today."

Mega AI deals, healthy loan growth, and accelerating consumer spending are all tailwinds for the industry. SpaceX's ( SPCX ) record IPO created a $500 million windfall for participating banks, while OpenAI ( OPAI.PVT ) and Anthropic ( ANTH.PVT ) may go public later this year.

On the other hand, there are no cracks in the credit markets yet, despite last quarter's concerns about banks' exposure to private credit funds .

For now, the overall credit picture in banking looks "benign," Martinez said.

Many of the big banks have also announced fresh plans for stock buybacks and dividends after passing their annual Federal Reserve stress test in late June. The stock prices of Goldman Sachs ( GS ), Morgan Stanley ( MS ), and Citigroup notched records in late June. Bank of America and JPMorgan shares reached their all-time highs earlier this week.

Investors now want assurance that the banks can keep that momentum — and that concerns from lofty AI valuations to higher gas prices aren't beginning to dent lending, dealmaking, and trading.

Analysts are forecasting these banks to post their second-best trading quarter this decade after record first quarter hauls, according to data compiled by Bloomberg.

Their Wall Street operations are "literally firing on all cylinders right now," Bank of America analyst Ebrahim Poonawala said in an interview. The hope is that the results signal what Wells Fargo analyst Mike Mayo described as a multiyear AI-driven "capital markets supercycle."

But "it can end in a nanosecond," Mayo cautioned in his interview last month.

The economic outlook still appears sound. Bank of America CEO Brian Moynihan said at a May conference that the US consumer remained "consistent with a strong underlying economy," adding that "as long as the consumer hangs in with the power of that engine, America stays in pretty good shape."

According to the Bank of America Institute, card spending jumped 6.3% year over year in June, the strongest growth in over four years. The rise is largely driven by discretionary purchases, per its Friday report . Customer accounts also showed improving wage growth and softer unemployment payments among lower-income customers.