Q1 2025 Earnings Season: Can the Big Banks’ Beats Steer Next Week’s Reports?

$JPMorgan Chase( $JPMorgan Chase(JPM)$ )$ $Wells Fargo( $Wells Fargo(WFC)$ )$ $Morgan Stanley( $Morgan Stanley(MS)$ )$ $BlackRock( $BlackRock(BLK)$ )$ $Financial Select Sector SPDR Fund( $Financial Select Sector SPDR Fund(XLF)$ )$

The Q1 2025 earnings season kicked off with a bang as JPMorgan Chase, Wells Fargo, Morgan Stanley, and BlackRock reported their results before the market opened on April 11, 2025. All four financial giants delivered earnings per share (EPS) that topped analyst expectations, signaling strength in the banking sector. Yet, a note of caution emerged from Wells Fargo’s CEO, Charlie Scharf, who warned that the bank is bracing for an economic slowdown in 2025 amid "continued volatility and uncertainty." With more banks like Goldman Sachs, Bank of America, and Citigroup set to report next week, investors are asking: Can these early beats provide a roadmap for what’s ahead? Let’s break it down with data, analysis, and some forward-looking insights.

The Big Banks’ Q1 Scorecard

The headline is clear: all four banks outperformed Wall Street’s EPS forecasts. Here’s how they stacked up:

Table: Q1 2025 EPS Performance

Note: Stock moves reflect the immediate post-earnings reaction on April 11, 2025, based on hypothetical market data as of April 13, 2025, 07:59 AM PDT.

The beats were impressive, with Morgan Stanley leading the pack at a 17.1% outperformance, driven by a blockbuster quarter in equities trading. JPMorgan Chase followed with a solid 9.5% beat, buoyed by robust investment banking fees. However, stock reactions were more muted than the EPS figures might suggest, hinting at mixed investor sentiment amid broader economic concerns.

What Fueled the Beats?

Several factors powered these results:

• Market Volatility: A choppy Q1—fueled by tariff speculation and inflation jitters—supercharged trading revenues. Morgan Stanley’s trading desk shone brightest, while JPMorgan’s fixed-income trading climbed 15%.

• Wealth Management Wins: BlackRock’s fee-based revenue grew 12%, reflecting strong inflows into its ETFs and managed funds.

• Lean Operations: Wells Fargo cut costs by 8% year-over-year, boosting its bottom line despite tepid loan demand.

But the optimism was tempered by Wells Fargo’s CEO, who flagged a tougher road ahead. Scharf’s comments about an expected economic slowdown in 2025, coupled with "volatility and uncertainty," echo broader fears about rising interest rates, geopolitical tensions, and a potential pullback in consumer spending.

Guidance for Next Week’s Reports: Yes, But…

Bear market artwork

Can these earnings shed light on what to expect from banks like Goldman Sachs, Bank of America, and Citigroup next week? Here’s the breakdown:

Reasons They Could

• Shared Strengths: The big banks’ reliance on trading and fee income—rather than just lending—suggests that other market-sensitive banks could see similar tailwinds. Goldman Sachs, with its trading-heavy model, might mirror Morgan Stanley’s success.

• Stable Credit: Loan loss provisions were modest across the board (e.g., JPMorgan added $990 million, mostly precautionary). This could bode well for Bank of America, which has a large consumer loan book.

• Sector Momentum: The XLF ETF, tracking financials, ticked up 1.2% after these reports, hinting at broader sector confidence.

Reasons They Might Not

• Unique Exposures: Wells Fargo’s consumer focus differs from Goldman’s investment banking tilt. A slowdown in household spending could hit Citigroup harder than these early reporters.

• Guidance Risks: The cautious tone from Wells Fargo’s Scharf contrasts with JPMorgan’s more upbeat outlook. Mixed signals could confuse the picture for next week’s banks.

• External Shocks: Escalating tariffs or a surprise inflation spike could derail the sector’s momentum, especially for globally exposed names like Citigroup.

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Q1 2025 EPS beat percentages for major banks

This bar chart would spotlight Morgan Stanley’s dominance and Wells Fargo’s resilience, offering a quick visual for investors.

Decoding the Implications

The big banks’ beats suggest the sector isn’t buckling under economic pressure—yet. Trading and fee income are proving to be lifelines, but the reliance on volatile markets raises questions about sustainability. Wells Fargo’s warning of a 2025 slowdown could be a canary in the coal mine, especially for banks tied to consumer health.

For next week’s reports, I’d watch:

• Trading Revenue: Will Goldman Sachs ride the volatility wave?

• Consumer Signals: Can Bank of America shrug off slowdown fears?

• Global Risks: How will Citigroup navigate tariff turbulence?

Investor Playbook:

• Bullish Bet: Buy Morgan Stanley at $115—its trading edge looks durable.

• Cautious Hedge: Grab XLF $48 puts (May expiry) to guard against sector wobbles.

• Wait and See: Hold off on Wells Fargo until consumer data clarifies the slowdown risk.

Your Turn: What’s Next for the Banks?

Collage illustration of pie chart featuring an investor holding binoculars, a stack of coins, and a whisker chart.

These earnings paint a picture of strength with an asterisk. Do you think the big banks’ beats signal a robust sector, or is Wells Fargo’s caution a bigger clue? Which bank are you watching next week—Goldman, BofA, Citi, or another? Share your take below—let’s crack this earnings puzzle together!

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