Banking Sector Boom as Policy Risk Emerges 

Wall Street’s biggest banks just wrapped up Q4 2025, and the message is crystal clear: markets and fee businesses are booming, while traditional banking is solid but less exciting. At the same time, The White House’s proposed 10% cap on credit card interest is a reminder that policy risk is suddenly front and center for the sector. 

Record Year, Markets in the Driver’s Seat 

Across the large US banks, 2025 was a banner year. Collectively, the majors generated record revenue and profit, with the real engine coming from Wall Street activity such as dealmaking, trading, and investment-related fees, rather than old-school spread banking. 

• Capital markets, advisory, and trading businesses led the upside. 

• Net interest income is still important, but the easy boost from higher rates has peaked as deposit costs catch up. 

In short, the system is healthy, profitable, and well-capitalized, just more market-driven than loan-driven right now. 

Bank-by-Bank Snapshot 

JPMorgan 

JPMorgan posted Q4 net income of $13.0 billion ($4.63 per share, or $5.23 adjusted) with revenue up 7% year-over-year (y/y) to $46.8 billion. Full-year 2025 net income reached $57.5 billion with earnings per share (EPS) of $20.18. Resilient consumers, strong card and payments, and robust equities trading (up 40%) all helped offset a $2.2 billion reserve build for the Apple Card portfolio acquisition. Investment banking fees declined 5% in Q4 due to deal deferrals into 2026, but management expects net interest income of approximately $103 billion for 2026. It remains the reference point for scale and diversification. 

Bank of America 

Bank of America earned $7.6 billion in Q4 (up 12% y/y) on $28.5 billion of revenue (up 7%). Full-year 2025 net income was $30.5 billion, up 13%. Net interest income surged 10% to $15.9 billion, while equities trading jumped 23% and fixed income trading rose modestly. The bank guided for 5-7% net interest income (NII) growth in 2026. The big NII tailwind of 2022-2023 is fading as funding costs normalize, but the bank projects continued growth from balance sheet expansion and asset repricing. 

Citigroup 

Citi delivered Q4 adjusted EPS of $1.81 that beat estimates, though reported net income fell 13% to $2.47 billion due to a $1.1 billion after-tax loss on divesting its Russian operations. Excluding this charge, profit was $3.6 billion. Revenue excluding Russia impacts rose 8% to $21.0 billion, with net interest income up 14% to $15.67 billion. For the full year, both revenue and net income improved as the firm pushes through CEO Jane Fraser’s “Project Bora Bora” simplification and exits non-core markets. Management committed to reaching at least 10% returns in 2026, with aspirations for higher levels beyond. 

Wells Fargo 

Wells reported Q4 net income of $5.4 billion ($1.62 per share, or $1.76 adjusted) on $21.3 billion in revenue (up 4%). Full-year 2025 net income was $21.3 billion with EPS up 17%. Following the June 2025 removal of the Fed’s asset cap, loans grew and trading assets increased 50%. Return on tangible common equity reached 15% for 2025, with a target of 17-18% ahead. Revenue came in slightly below expectations, and mortgage-related profits and guidance held things back. After years of cleanup, markets are watching carefully to see how durable this new growth story really is. Management expects net interest income of approximately $50 billion for 2026. 

Capital Markets Back in Full Voice 

Goldman Sachs 

• Q4 profit was $4.62 billion with EPS of $14.01 (up from $4.12 billion a year earlier). 

• Full-year 2025 net revenues reached $58.28 billion with net earnings of $17.18 billion. 

• Investment banking revenue jumped 25% to $2.58 billion in Q4, with the firm maintaining #1 rankings in M&A advisory. 

• Equities trading soared 25% to $4.31 billion (beating estimates by $610 million), while fixed income trading climbed 12% to $3.11 billion. 

• Quarterly dividend increased 12.5% to $4.50 per share, a 50% rise compared to the prior year.  

Morgan Stanley

• Q4 profit climbed to $4.40 billion ($2.68 per share), up from $3.71 billion ($2.22 per share) a year earlier. 

• Revenue increased 10% to $17.89 billion from $16.22 billion. 

• Investment banking was the standout, with Q4 revenue surging 47% to $2.41 billion, driven by robust M&A advisory and debt underwriting. 

• Wealth management posted record full-year revenue of $31.8 billion, with total client assets reaching $9.3 trillion (up over $350 billion in net new assets). 

Both firms are clear beneficiaries of reviving IPO, M&A, and capital-markets pipelines, plus ongoing growth in wealth management flows. 

Strong Fundamentals, Shifting Drivers 

Taken together, these earnings point to a few big themes: 

• Markets are back in charge. Investment banking and trading are driving upside at Goldman, Morgan Stanley, and the markets arms of JPM and BofA. Investment banking revenues surged across the sector, with Morgan Stanley’s 47% jump leading the pack. 

• Core banking is fine, not fabulous. Loan growth is okay, credit quality is decent, but the rate tailwind is fading as deposit costs bite. 

• Credit is not the problem, for now. Provisions are manageable and there is no sign of an imminent credit shock, though management teams still flag risks from slower growth and higher-for-longer rates. 

Strategic Paths are Diverging:

• Goldman is exiting mass-market consumer lending and doubling down on trading and wealth. 

• Morgan Stanley is leaning into its wealth and advisory franchise. 

• Citi is in simplification mode under “Project Bora Bora.” 

• JPM and BofA are flexing universal-bank scale. 

• Wells is proving out its post-asset-cap, post-scandal model. 

In other words, US large banks are exiting 2025 from a position of strength, but the sources of that strength are increasingly fee- and market-driven. 

The White House’s Proposed 10% Cap on Credit Card Interest 

That is the earnings story. Now comes the political twist. 

The White House proposed a one-year 10% cap on credit card interest rates on January 10, 2026, with implementation set for January 20, 2026. Average US card APRs today are north of 20%, and for the universal banks—JPMorgan, Bank of America, Citi, and Wells—cards are among the highest-return products they offer. 

A cap at 10% goes straight at that profit pool. 

A few key points: 

• This is a proposal, not law. It would require Congress and cannot be done by executive order alone. 

• There is some bipartisan rhetorical support for reining in card rates, with progressives on the left and a few populist conservatives on the right. 

• Markets treated it as a genuine risk. Bank stocks fell following the announcement, with shares of Citigroup, JPMorgan, Wells Fargo, and Bank of America declining. It introduces a new regulatory overhang on future earnings from consumer credit. 

From the banks’ perspective, the message is blunt. If enacted as described, it would hit card economics hard. Card portfolios are priced assuming: 

• A mix of revolvers paying high rates and transactors paying none, 

• Plus charge-offs from defaults and fraud. 

Cut the yield in half and banks either slash risk, by tightening underwriting, trimming limits, and pulling back from higher-risk borrowers, or recoup the economics elsewhere, via higher fees, thinner rewards, shorter teaser periods, or shifting borrowing into products not covered by the cap. 

Not all banks are equally exposed: 

• Most exposed: JPMorgan, BofA, Citi, and Wells Fargo, all of which run large US card franchises spanning prime and near-prime customers, co-brands, and private labels. 

• Less exposed: Goldman, which is already backing away from consumer credit, and Morgan Stanley, which is overwhelmingly focused on wealth and institutional clients. 

If some version of a cap actually makes it into law, likely responses include: 

• Tighter underwriting and lower credit limits, especially at the lower end of the credit spectrum. 

• Leaner rewards programs and fewer generous sign-up bonuses. 

• More emphasis on personal loans, HELOCs, or BNPL-style products that could sit outside a narrowly drafted cap. 

• An even stronger pivot toward fee and advisory businesses where returns are not directly capped. 

We are already seeing marketing responses at the margin, such as cards advertising 10% promotional APRs in line with the idea, followed by much higher rates later on. That underscores the core point: a temporary statutory cap does not change the underlying risk math, it just changes where and how banks try to earn their return. 

Strong Banks, New Policy Overhang 

Right now, the picture looks like this: 

• Fundamentals: Strong capital, solid earnings (JPM’s $57.5B net income for 2025, BofA’s $30.5B, Goldman’s $17.18B), decent credit quality, and growing fee income from markets, wealth, and advisory. 

• Macro risks: Higher-for-longer rates and a slower economy, but no obvious crisis. 

• Policy risk: A serious conversation about capping card rates that directly targets one of the sector’s most profitable consumer products. 

The big banks almost certainly have the earnings power to absorb a one-year shock if they have to, but it’s unlikely they will just quietly eat it. 

For investors and policymakers, the key questions now are: 

• Does a 10% cap, or anything like it, actually pass Congress? 

• If it does, how tight is the language, and what products does it really cover? 

• How aggressively do banks respond by repricing risk and restricting credit? 

The answers will determine whether this ends up as a one-off squeeze on card margins in an otherwise healthy sector, or the opening chapter in a more fundamental rewrite of how US consumer credit and big-bank profitability are structured. 

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