Wall Street Profits Rise on Strong Trading
Wall Street’s major investment banks are poised to post stronger revenue for the second quarter of 2026, driven primarily by gains in equity trading and underwriting, according to Moody’s Ratings.
Moody’s anticipates positive results from the six large U.S.-based global investment banks, including Bank of America Corp., Citigroup Inc., Goldman Sachs Group, Inc., JPMorgan Chase & Co., Morgan Stanley, and Wells Fargo & Co. The firms will begin reporting second-quarter earnings on July 14.
The research note from Moody’s states that overall results will be “led by stronger equity trading, equity underwriting and debt underwriting revenue.” The agency noted that the value of initial public offerings (IPOs) and secondary offerings were up significantly compared to the same quarter in 2025, with U.S. debt issuance volumes also significantly higher than a year ago across all bond types.
While the SpaceX IPO led the increase in U.S. equity IPO proceeds, Moody’s said that even excluding that flotation, “IPO proceeds were more than double those of a year ago.” The firm also reported that investment grade bond issuance surged in the second quarter, and convertible bond activity was strong.
Moody’s reported that the volume and value of completed M&A transactions were higher in the second quarter, though the increase was more modest than in the securities underwriting business. On the trading side, revenues from fixed income, currencies and commodities (FICC) trading “will likely be lower because of generally softer trading volumes and lower volatility.”
The agency expects equity trading revenues to be stronger, “supported by record volumes and raised bid/ask spreads, despite lower volatility.” Trading activity in both cash and equity derivatives reached record highs. Moody’s concludes that trading in equities is expected to offset weakness in FICC derivatives, credit ETFs, and bond trading volumes.
Broader market context
Regulatory changes in the sector are prompting a review of current frameworks. Banks are adjusting operations to align with new expectations regarding disclosure and risk management. Ontario Seeks to Revise Insurance Regulations.
Analysts project that the revenue mix will shift further as these structural adjustments take hold. The competition for capital is intensifying across the board. Investors are closely watching how the institutions manage these transition periods.
The surge in investment grade bond issuance can be attributed to the favorable market conditions, which have encouraged companies to raise capital through debt issuance. This trend is expected to continue, driven by the demand for high-quality bonds and the relatively low interest rates. As a result, the investment banks are likely to benefit from the increased activity in the debt markets.
The increase in convertible bond activity is also noteworthy, as it indicates that companies are exploring alternative ways to raise capital. Convertible bonds offer a flexible financing option, allowing companies to raise debt capital that can be converted into equity at a later stage. This trend is expected to continue, driven by the growing demand for innovative financing solutions.
The record highs in trading activity in both cash and equity derivatives are a sign to the growing sophistication of the financial markets. The increased use of derivatives is driven by the need for investors to manage risk and generate returns in a complex and volatile market environment. As a result, the investment banks are likely to benefit from the increased activity in the derivatives markets.
The shift in revenue mix is expected to have a significant impact on the investment banks’ business models. The banks will need to adapt to the changing market conditions and regulatory requirements, which will require significant investments in technology, risk management, and talent acquisition. The ability to handle these changes will be critical to the banks’ long-term success and competitiveness.
