Despite some isolated loan losses that briefly shook markets and investors, the U.S. banks produced strong earnings for the third quarter, Fitch Ratings reports.
The rating agency said that the 20 largest U.S. banks recorded a 5.3% rise in aggregate revenues on a quarter-over-quarter basis in Q3, and revenues were up by 10.1% compared with the same quarter a year ago — driven by gains in both net interest income and fees.
Aggregate net interest income was up by 5.1% quarter-over-quarter, amid a combination of declining deposit funding costs, accelerating loan growth and “upward repricing of maturing fixed-rate assets,” Fitch noted.
At the same time, aggregate non-interest income rose by 5.4%, driven by strength in trading, investment banking, wealth management and payments.
For the big five Wall Street investment banks, aggregate trading income reached its highest level since the first quarter of 2021, and investment banking revenues also reached their highest levels since 2021, “as firms executed long-delayed [deal] pipelines,” Fitch noted — adding that deal backlogs signal that investment banking activity will remain strong into next year.
Indeed, the ongoing recovery in dealmaking, coupled with continued loan growth and asset repricing means that the sector “will likely sustain strong revenue performance into 2026,” it said. “Fitch expects these drivers will support the revenue environment well into 2026, regardless of the precise cadence of rate cuts.”
During the quarter, several big banks disclosed loan losses stemming from corporate bankruptcies, and suspected fraud.
“Losses on similarly secured lending at smaller regional banks raised investor concerns about collateral management quality and credit underwriting for banks’ fast-growing exposures to non-bank financial institutions,” Fitch said. “Even so, banks broadly affirmed guidance on net charge-offs.”
The sector’s capital levels remained stable in the quarter, the report noted, as banks wait for greater clarity on the evolving regulatory picture — including the final Basel III reforms, capital buffers and the stress testing methodology.
Fitch said that it “expects an acceleration of capital actions over coming quarters and a moderate decline in capital levels considering regulatory loosening and organic growth.”