U.S. Major Banks' Q3 Equity Trading Shines as Bright Spot: Goldman Sachs and Morgan Stanley Beat Expectations
nashnova research
The five largest US banks posted roughly $67 billion in equities-trading revenue through the first three quarters, topping fixed-income by about $5 billion; Goldman Sachs, JPMorgan and Morgan Stanley all beat expectations, but a widening debate over whether high rates will keep fueling — or start choking — volumes hangs over the next earnings cycle.
KBW Bank Index down six straight weeks — so why is equities trading a bright spot?
The KBW Bank Index fell for six consecutive weeks, its longest losing streak since 2008, putting broad bank stocks under pressure.
Yet equities trading bucked the trend: Goldman Sachs, JPMorgan and Morgan Stanley all beat market expectations, driven by rising global volatility and a surge in prime-brokerage — the business of executing and financing trades for hedge funds.
Citi and Bank of America missed the mark. This means → the gap between top and bottom within the same business line is widening; not every bank is capturing this wave.
Could equities revenue really overtake fixed income?
Wells Fargo analyst Mike Mayo flagged a "multi-year divergence" between equities and fixed-income trading, projecting 2026 as the first year since 2008 that equities revenue surpasses FICC.
The volume data backs him up: dollar-denominated equity trading on US exchanges is up 27% year-to-date, following gains of 36% and 18% in the prior two years.
In plain terms = equities trading has risen three years running, and the increase is not just in trade count — the dollar size per trade is growing too. Capital is migrating toward equities.
What is driving this volume surge?
Bloomberg Intelligence's Larry Tabb described first-half volumes as "explosive growth."
The drivers span multiple threads: risk-off trades triggered by the Iran war, concentrated AI-stock activity, short bets against software names, a retail rush around the SpaceX IPO, and market reactions to President Trump's various policy statements.
This reflects a trading environment powered not by one theme but by several event lines firing at once — hard to shut off with a single switch, but any single thread fading will trim the total.
How pronounced is the winner-take-most dynamic?
Seaport analyst Jim Mitchell noted that "the strong continue to significantly outperform the weak" in global equities, with industry concentration rising further.
Goldman, JPMorgan and Morgan Stanley, as the dominant prime brokers, control the core trading plumbing hedge funds rely on.
This means → smaller banks trying to capture a share of equities growth face steepening odds; the gains are concentrating in a handful of names.
High rates — catalyst turning into constraint?
Mayo framed the central risk: "higher rates evolving from a trading catalyst into a constraint on the super-cycle's share and duration."
In plain terms = early volatility spurs hedging and position adjustments — fee income for banks. But persistently high yields raise funding costs, compress equity valuations, and delay M&A and IPO pipelines — precisely the long-term fuel for trading volumes.
Bank stocks also face pressure from expectations of AI disruption in financial services and uncertainty over the Fed's inflation-fighting path. Whether equities trading can sustain its current pace is the key test for the next earnings season.
Where is the competitive pressure on the retail side?
Charles Schwab recorded one of its busiest trading days in 55 years on the day SpaceX listed in June, driven by a wave of retail participation.
Prediction-market platforms Kalshi and Polymarket set all-time volume records during the World Cup, and the approaching US midterm elections are expected to create fresh trading catalysts.
This means → large banks dominate institutional flow, but the retail leg is being siphoned by brokerages and emerging platforms — two legs of the same story, each facing an entirely different set of competitors.
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