America's largest banks delivered fourth-quarter results that largely exceeded Wall Street expectations Wednesday, with trading operations providing the spark. Yet the earnings celebrations were tempered by warnings about consumer credit stress and the potential fallout from President Trump's proposed cap on credit card interest rates.

Bank of America reported earnings per share of $0.98, ahead of the $0.89 consensus estimate. Citigroup posted adjusted earnings of $1.81 per share versus expectations of $1.67. Wells Fargo, however, missed forecasts at $1.62 per share against the $1.67 expected, weighed down by severance costs.

Trading Fuels the Outperformance

The standout story across bank earnings has been trading revenue. Bank of America's equities trading operation generated $2.02 billion in revenue, up 23% from the prior year and approximately $160 million above analyst forecasts. The fixed income trading desk contributed $2.52 billion, a 1.5% increase.

Citigroup's markets division similarly impressed, helping the bank exceed revenue estimates despite a $1.1 billion after-tax charge related to its ongoing Russian operations divestiture. Revenue excluding that charge rose 8% to $21 billion.

The trading strength reflects elevated market volatility throughout 2025, driven by everything from AI-fueled tech stock swings to geopolitical uncertainty. Banks that maintained robust trading operations are now reaping the rewards.

"While any number of risks continue, we are bullish on the U.S. economy in 2026. Our trading desks performed exceptionally well in a volatile but active environment."

— Brian Moynihan, Bank of America CEO

Net Interest Income Shows Resilience

Bank of America's net interest income rose 9.7% to $15.92 billion, exceeding expectations by approximately $240 million. This metric—the difference between what banks earn on loans and pay on deposits—had been a concern as the Fed cut rates in late 2025.

The better-than-expected results suggest banks have successfully managed their interest rate exposure and that loan demand remains healthy. With the Fed now expected to hold rates steady through at least June, banks may enjoy a more stable interest income environment than previously feared.

The Credit Card Conundrum

Offsetting the positive results were stark warnings about consumer credit. JPMorgan CFO Jeremy Barnum said Tuesday that President Trump's proposed one-year 10% cap on credit card rates would be "very bad for consumers, very bad for the economy."

Bank of America and Citigroup executives echoed those concerns Wednesday. The issue is straightforward: if banks cannot charge rates that reflect credit risk, they will simply stop lending to riskier borrowers. Credit card access could tighten significantly, particularly for consumers with lower credit scores.

The average credit card interest rate currently hovers around 21%. A 10% cap would represent a dramatic reduction that banks argue would make consumer lending uneconomical for many customers.

Wells Fargo's Transition Year

Wells Fargo's miss reflected its unique circumstances rather than broader sector weakness. The bank is emerging from years of regulatory constraints following its fake accounts scandal, with the $1.95 trillion asset cap finally lifted in late 2025.

The earnings miss included $0.14 per share in severance costs as the bank continues restructuring. Looking ahead, Wells Fargo has authorized a $40 billion share repurchase plan, signaling confidence in its future profitability now that regulatory shackles have been removed.

CEO Charlie Scharf emphasized that 2026 represents the beginning of a new era for the bank, with opportunities to expand that were previously forbidden.

Signs of Consumer Stress

Beyond the credit card cap concerns, bank executives noted early signs of stress among lower-income consumers. Credit card delinquencies have ticked higher, and spending patterns suggest some households are pulling back.

However, executives characterized this as normalization rather than crisis. Delinquency rates remain below historical averages, and higher-income consumers continue spending robustly. The "K-shaped" economy that emerged during the pandemic persists, with wealthier households thriving while others face pressure.

What It Means for Bank Stocks

Despite the earnings beats, bank stocks have struggled. The S&P 500 financials sector has underperformed the broader market in January, weighed down by concerns about:

  • Credit card rate cap proposals and their impact on consumer lending profitability
  • Potential credit losses if the economy weakens
  • Uncertainty about the regulatory environment under the new administration
  • Elevated expenses as banks invest in technology and face wage pressures

The sector's price-to-earnings ratios remain well below historical averages, suggesting investors see meaningful risks ahead despite the strong earnings reports.

Thursday's Final Act

The bank earnings season concludes Thursday with Goldman Sachs and Morgan Stanley reporting. These investment banking-focused firms will provide the final read on capital markets activity and deal-making prospects for 2026.

Expectations are high following strong trading results at their competitors. Any disappointment could extend the sector's weakness; beats could finally provide the catalyst for a rebound.

For now, the message from bank earnings is nuanced: core operations remain strong, but significant uncertainties—from regulatory changes to consumer health—cloud the outlook. Trading desks delivered, but whether that momentum can offset emerging headwinds remains an open question.