Goldman Sachs: Strong 2Q26 results for major Americas banks, with focus on the sustainability of NII, fee income, and capital return in 2H26
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Goldman Sachs: Strong 2Q26 results for major Americas banks, with focus on the sustainability of NII, fee income, and capital return in 2H26
The report argues that large banks' 2Q26 core EPS overall beat consensus by 8%, with loans and capital markets revenue driving the revenue upside, while WFC, BAC, and C are viewed as the best-positioned Buy-rated names.
- Large banks' 2Q26 core EPS overall was 8% above Visible Alpha consensus, with revenue 4% above, margin improvement of about 130bps, and provisions 4% lower.
- Loan growth continued to accelerate, rising about 7% to 7.5% YoY in 2Q26, with C&I up 14% YoY, CRE turning positive to about 3%, and consumer loans up about 3% YoY.
- Street expectations for 2026E NII growth were raised from about 5% YoY at the start of the year to about 9%, supported by stronger loan growth and fixed-rate asset repricing.
- Large bank balance sheets have grown about 26% since 2Q21, relying more on short-term borrowings and repo funding, while AI capex-related financing demand remains a supporting factor.
- Deposits grew about 7% YoY, mainly driven by 10% YoY growth in corporate deposits, but deposit costs still face competitive pressure.
- Capital markets performance was strong, with trading revenue up 33% YoY and investment banking revenue up 42% YoY, though there is seasonal risk of slower activity in the second half.
Report interpretation
Overview
This is a Goldman Sachs sector research report reviewing 2Q26 results for major Americas banks and providing an outlook for 2H26 and the longer term. The core conclusion is that large bank earnings were stronger than expected, with revenue driven by balance-sheet expansion, loan growth, upward revisions to net interest income, and capital markets fee income; at the same time, expense discipline delivered solid operating leverage, and capital return is expected to remain elevated.
Core views
Goldman Sachs believes the operating backdrop for large banks remains constructive. 2Q26 core EPS overall was 8% above consensus, the loan growth environment is strong, and C&I, CRE, and consumer lending all have support, driving 2026E NII growth expectations up to the high single digits YoY. Corporate deposit growth is strong, but deposit competition remains, and funding costs may continue to rise; however, improved asset yields are expected to partially offset this. Capital markets revenue posted strong performance, with trading and investment banking revenue rising sharply YoY. On capital, although CET1 ratios declined about 10bps QoQ, banks still have about 80bps of excess capital above targets, and 2026E capital return is expected to grow about 15% YoY.
Analysis framework
The report is based on 2Q26 large bank earnings, company management guidance, Visible Alpha consensus, company data, and Goldman Sachs Global Investment Research forecasts. It compares banks across NII, loans, deposits, balance-sheet funding structure, credit, expenses, capital return, capital markets revenue, and valuation, and further screens for bank stocks with stronger relative positioning.
Methodology notes
Break down core EPS outperformance into contributions from revenue, margins, and provisions.
The report notes that large banks' 2Q26 core EPS overall was 8% above consensus, driven by revenue 4% above, margin improvement of about 130bps, and provisions 4% lower.
Assess net interest income through loan growth, fixed-rate asset repricing, deposit costs, and yield changes.
The report emphasizes that accelerating loan growth and fixed-rate asset repricing drove upward revisions to 2026E NII expectations, while deposit competition and funding costs are offsetting factors.
Use capital adequacy, buybacks and dividends, P/TBV, and ROTCE to assess the reasonableness of bank stock valuations.
Goldman Sachs believes that although large banks trade at about 2.2x 2026E TBV, the roughly 18.5% 2027E ROTCE can support a higher price-to-book multiple.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- WFCBuy-rated, on America's Conviction list, and identified in the report as one of the best-positioned stocks.
- Strengths
- A favorable combination of NII and fee income growth, modest expense growth, and significant operating leverage; strategic growth areas include capital markets and credit cards, with potential to reach the 2026 NII target of $50bn.
- Weaknesses
- Rising deposit funding costs in the second half may pressure NII; it has significantly underperformed bank peers and the broader market year to date.
- Comparison
- Relative to peers, WFC's valuation has pulled back to about 11.5x NTM P/E, and its relative P/TBV multiple also appears low; the report sees this as an attractive entry point.
- Risks
- Intensifying deposit competition, weaker-than-expected balance-sheet growth, lower-than-expected expense savings, and a deterioration in the credit environment.
- BACBuy-rated and identified in the report as one of the best-positioned stocks.
- Strengths
- The 2026E/2027E NII path remains attractive, with high asset sensitivity; fixed-rate asset repricing, loan and deposit growth, and improved deposit repricing all provide support.
- Weaknesses
- Expenses are still expected to grow YoY, and valuation is not low, requiring delivery on NII and operating leverage.
- Comparison
- The report expects BAC's 2027E NII to grow about 6% YoY, around 1 percentage point above the large bank average; about 1.9x 2027E P/TBV remains attractive relative to roughly 17% ROTCE.
- Risks
- An unfavorable rate path, weaker-than-expected loan and deposit growth, and failure of capital return upside from regulatory capital reform to materialize.
- CBuy-rated and identified in the report as one of the best-positioned stocks.
- Strengths
- Goldman Sachs believes the investment case for Citi improving toward higher returns remains intact, with core revenue growth, efficiency gains, DTA utilization, and RWA discipline all able to drive earnings and returns higher.
- Weaknesses
- Management mentioned accelerated investment in 2H26, which could bring expense pressure and a more uncertain near-term expense outlook.
- Comparison
- Goldman Sachs expects C to achieve about 11.5% ROTCE in 2026E and believes management's capital outlook is conservative, leaving room for upside in return targets.
- Risks
- Transformation execution falling short of expectations, expense growth above expectations, slower-than-expected improvement in capital efficiency, and regulatory pressure or volatility in markets businesses.
- JPMA large-bank peer comparison name; the report cites its comments on loan growth, deposit costs, and consumer resilience.
- Strengths
- Constructive loan growth outlook, with demand coming from financials, data centers, and AI capex; consumer and small business spending remains resilient.
- Weaknesses
- Deposit costs are rising, and reliance on short-term borrowings and repo funding has increased.
- Comparison
- Along with BAC, C, MS, and WFC, it forms part of the sample used in the top five banks' balance-sheet expansion analysis.
- Risks
- Rising funding costs, seasonal slowdown in customer activity in the second half, and credit normalization.
- USBA large-bank peer comparison name.
- Strengths
- Management expects loan growth above the mid-single digits, with C&I and CRE pipelines supporting more than 5% 2026E NII growth.
- Weaknesses
- Needs continued expense discipline and asset repricing support to sustain operating leverage.
- Comparison
- The report notes that banks such as BAC, USB, and PNC are committed to delivering 200bps or more of operating leverage this year.
- Risks
- Slower loan demand, deposit competition, and CRE risk.
- PNCA large-bank peer comparison name.
- Strengths
- 3Q26E average loan guidance implies 1%-2% QoQ growth, and 2026E guidance was raised by 1.5 percentage points to 12.5% YoY, driven by C&I and CRE demand.
- Weaknesses
- Excluded from some comparisons due to the impact of the FirstBank acquisition.
- Comparison
- In some loan and NII charts, it is excluded from like-for-like averages because of the FirstBank acquisition impact.
- Risks
- M&A-related impact, a slowdown in loan growth, and pressure from deposit and funding costs.
Key data
- 2Q26 core EPS versus consensus+8%Large banks' overall core EPS was above Visible Alpha consensus.
- 2Q26 loan growthabout +7% to +7.5% YoYContinued to accelerate from about 6.5% YoY in 1Q.
- C&I loan growth+14% YoYAI capex, infrastructure buildout, and higher utilization by middle-market borrowers were highlights.
- CRE loan growth+3% YoYTurned positive, reaching the highest level since 1Q24.
- 2026E Street NII growth expectation+9% YoYRaised from about +5% YoY at the start of the year, driven by loan growth and asset repricing.
- Top five banks balance-sheet growthabout +26% since 2Q21Mainly driven by repo and loan portfolio expansion, especially in markets businesses.
- Large bank deposit growth+7% YoYMainly driven by corporate deposits at +10% YoY.
- Change in deposit yield+1bp QoQStill edged up despite unchanged average Fed Funds, reflecting competitive pressure.
- Change in average NCO ratedown 6bps YoY, down 3bps QoQAbout 10bps below the 2Q24 peak and close to the 2014-2019 average of 0.54%.
- Trading revenue+33% YoYIncluding equity trading revenue growth of about 70%.
- Investment banking revenue+42% YoYECM and advisory grew about 74% and 32%, respectively.
- Large bank share price performance+21% since the end of 1Q26Outperformed the S&P 500 by about 6 percentage points, mainly driven by multiple expansion.
Impact & implications
For investors, the main implication of the report is that large bank fundamentals remain strong, and in 2H26 upward NII revisions, loan growth, capital markets revenue, and operating leverage may continue to support earnings; however, as share prices and valuation multiples have already risen, stock selection depends more on individual names' revenue elasticity, expense discipline, capital return capacity, and relative valuation. Goldman Sachs identifies WFC, BAC, and C as the better allocation directions.
Risks
- Deposit competition persists, and deposit beta and funding costs may continue to rise.
- Large bank balance-sheet expansion is increasingly reliant on short-term borrowings and repo funding, strengthening funding-side constraints.
- Capital markets and investment banking businesses may be affected by slower summer client activity in the second half.
- Bank stocks have already risen about 21% since the end of 1Q26, and the margin of safety has declined after multiple expansion.
- If AI capex and data-center-related financing demand slows, it could weaken loan growth and balance-sheet expansion momentum.
- Although credit metrics are stable, they are still in a normalization process; if employment or wage growth weakens, consumer and commercial credit may come under pressure.
- Accelerating expense investment, especially for names such as C, could pressure near-term operating leverage.
What to watch
- Whether NII guidance continues to be revised upward in 2H26, especially from loan growth and fixed-rate asset repricing.
- Deposit growth and changes in deposit costs, especially whether banks with strong deposit growth need to pay higher costs.
- Whether AI capex, data centers, and infrastructure financing demand continues to support C&I lending.
- Whether capital markets revenue shows a seasonal decline in the second half, and investment banking pipeline conversion rates.
- CET1 ratios, the pace of buybacks and dividends, and the extent to which the expected roughly 15% YoY growth in 2026E capital return is delivered.
- Progress on expense discipline, operating leverage, and ROTCE targets for WFC, BAC, and C.
- Changes in large banks' P/TBV and P/E relative to the S&P 500 and their own historical ranges.