Bank Stocks Made A Killing In 2025. Can They Keep It Up In The New Year?

• Large banks outpaced regional banks by wide margins, with money-center banks up 47% versus 21% for superregionals in 2025; JPMorgan's market cap rose 31.3% to $886 billion while Morgan Stanley and Goldman Sachs hit record highs after strong Q4 earnings.
• Loan demand rebounded to 5.7% year-over-year growth by end of 2025 from zero in April 2024, while the yield curve steepened with the 10-year/2-year spread widening to 64 basis points, boosting net interest margins.
• Trump's proposed 10% credit card interest rate cap and regulatory rollbacks create mixed pressures, with the administration eliminating 2013 leveraged lending restrictions while threatening traditional credit card revenue streams that could reduce deposit profits by 20% or more if AI agents help consumers optimize rates.

Bank Stocks Performance and 2026 Outlook

Key Performance Metrics

Bank stocks significantly outperformed the broader market in 2025, with IBD's Banks-Money Center industry group up 47% versus 21% for superregional banks. JPMorgan Chase's market cap rose 31.3% to $886 billion, while Goldman Sachs jumped 46.7% to $263.6 billion. The Invesco KBW Bank ETF gained over 30%.

Q4 Earnings Results

Recent earnings showed mixed results. JPMorgan, Bank of America, and Wells Fargo fell below their 50-day moving averages after reporting, with Wells Fargo missing estimates. However, Morgan Stanley and Goldman Sachs hit record highs following strong Thursday reports driven by robust trading and capital markets activity.

2026 Outlook and Fundamentals

Analysts project strong fundamentals entering 2026: loan demand increased to 5.7% year-over-year by end-2025 (from zero in April 2024), forward profit margins rose to 27% from 24%, and the yield curve steepened with the 10-year/2-year spread widening to 64 basis points. Net charge-offs improved to 0.51% versus 0.55% year-over-year.

Earnings growth estimates show 17.6% for 2025, 13% for 2026, and 13.7% for 2027, with the price-earnings ratio at a relatively low 13.7.

Regulatory and Policy Developments

The Trump administration is easing regulations, including removing 2013 leveraged lending restrictions and proposing Basel III changes. However, Trump's push to cap credit card interest rates at 10% for one year pressured card issuers and bank stocks this week.

Emerging Trends

Banks face competition from retailers expanding banking services and crypto firms launching stablecoins. AI adoption could improve efficiency ratios by 15 percentage points but also threatens deposit profitability long-term. Bank M&A activity reached four-year highs in Q3 2025, supporting sector valuations.