Banks weathered the Iran war. How did they do it and can they keep doing it?
Bank earnings confirmed one thing this week: The Iran war may be a major geopolitical upheaval, but not a financial one. March, the final month of the first quarter, was brutal on Wall Street. The conflict started on Feb. 28, and quickly sent oil prices soaring and stocks tanking. Wells Fargo shares tumbled to a nearly eight-month low in mid-March, while Goldman Sachs fell to a fourth-month low a couple of weeks later. At the time, investors couldn’t sell stocks fast enough on worries about what oil supply disruptions and rising energy costs would mean for inflation and the consumer. The S & P 500 closed at a wartime bottom on March 30, a day before the banks closed their books on the quarter. While stocks have since soared back to record highs on hopes that the war will end soon, the impact of market moves in April won’t show up until next quarter. Sure, they might have given bank management teams some room to be a little more bullish on this week’s post-earnings calls. However, when looking at the reported Q1 numbers, there were already reasons to be optimistic. Club name Goldman beat expectations on both revenue and earnings, and other industry heavyweights, like JPMorgan , Morgan Stanley , Citigroup , and Bank of America , all followed suit or at least met estimates. Wells Fargo, also in the portfolio, did miss on revenue slightly, but still came in above expectations on earnings. On CNBC and at Club meetings this week, Jim Cramer was high on Goldman, Morgan Stanley, and Citi, which were all up for the week. He expressed concern about Wells, which was our worst performer in a week that saw the S & P 500 surge roughly 4.5%. Beyond share price, three themes from earnings showed us why banks were able to still perform despite the geopolitical upheaval. 1. Wall Street dealmaking remained strong. Goldman said Monday that investment banking revenue jumped 48% year over year to $2.48 billion. In fact, CEO David Solomon said that the investment banking backdrop “continues to be incredibly robust.” This crucial business for Goldman brings in money through advisory fees on mergers and acquisitions, along with proceeds from helping companies go public. It’s a key reason why we got into the stock to begin with. At Wells, investment banking revenue surged 68% year over year to $602 million. It’s a smaller — yet burgeoning — line of business compared to Goldman. We’re glad to see CEO Charlie Scharf diversifying revenue so the bank is not so heavily reliant on interest-based streams. The bank’s net interest income, a key profitability metric, disappointed us this quarter. Scharf said during Tuesday’s earnings call that “while market conditions can change, the outlook for investment banking remains strong and we entered the second quarter with a strong pipeline driven by M & A, and equity capital markets.” Wells has invested significantly in its dealmaking unit in recent years. Now that the Federal Reserve-imposed $1.95 trillion asset cap was removed last summer, the firm’s been growing the business even more. To be sure, the asset cap was put on Wells in 2018 for scandals before Scharf joined the company. Outside the portfolio, JPMorgan Chase said that dealmaking revenue rose 38% year over year to $3.1 billion. Citi saw a 19% year over year increase over the same stretch to $1.3 billion. To be sure, Wall Street execs did admit that the war-induced volatility put a snag in some deals. After all, uncertainty tends to make companies more conservative with capital. During Goldman’s earnings call, Solomon said there is “no question” that initial public offerings “slowed a little” in March. But, he added that the firm has a “very full pipeline” of deals. The result? In the absence of a quick resolution, the Middle East conflict may push public listing plans to later in the year, according to Matt Kennedy, a senior IPO market strategist at research firm Renaissance Capital. “There had been a lot of hope and optimism coming into the 2026 year, just given how the last four years were below average in terms of IPO activity, which had created this building pipeline of deals,” Kennedy told CNBC. “We’re tracking literally hundreds of companies that could go public that are sitting on the sidelines. [They’ve been] waiting for the right time [and have] raised substantial war chests, which gives them the ability to kind of be more picky about the public market they choose to go public into.” Kennedy, however, expects the slowdown to be temporary, pointing to big-name IPOs from this week. HVAC firm Madison Air Solutions went ahead with its offering and saw its shares on Thursday debut up more than 17.5% in the biggest industrial offering since 1999. It rose again on Friday. Goldman and Wells Fargo had a hand in the Madison IPO. 2. Credit cards were an unexpected bright spot. Despite the overall revenue miss, Wells Fargo’s credit card business grew significantly. On the call, CFO Mike Santomassimo said that new credit card account openings surged nearly 60% year over year. The bank’s consumer banking and lending division saw first-quarter revenue increase 6.6%. Revenue from credit cards, specifically, was up 5%. We have praised Wells Fargo’s effort to capture share in the high-margin consumer credit space. Before energy prices spiked due to the war, Scharf said that gas represented 6% of total debit card spending and 4% of total credit spending. Those levels each rose 1 percentage point. “Consumers are spending more than a year ago, which includes spending more on gas, but they haven’t slowed spending on everything else,” he added. JPMorgan shared similar sentiments. Despite higher gas prices, CFO Jeremy Barnum said, “consumers and small businesses remain resilient.” Consumer spending growth continued above last year’s pace, too, he said. Revenue for JPMorgan’s combined card services and auto lending segment jumped 13%. Credit card spending volume was up 9% year over year. JPMorgan and Wells make money from credit cards because when customers use them more, banks make more on fees and interest. Delinquency rates for both banks were relatively stable, meaning that there’s less credit risk for the firms. Credit cards aren’t particularly important for Goldman anymore. Earlier this year, management largely closed its consumer foray, announcing that JPMorgan would take over the Apple credit card. Credit cards are the main business of another portfolio name, Capital One , which reports earnings next week. 3. It was a standout quarter for trading desks. The intense market volatility ensued by the Iran-U.S. conflict caused record-breaking client activity. Trading desks earn more when volumes spike through commissions and the bid-ask spread. For Goldman Sachs, equities revenue increased 27% year over year to a new bank record of $5.33 billion. “Elevated uncertainty led clients to actively reposition portfolios, driving strong flows,” Solomon said. “These results reflect the strength of our global franchise and the depth of our relationships and our ability to execute for clients while maintaining a strong focus on risk management in a highly dynamic environment.” While equities revenue jumped, Goldman’s fixed income, currency, and commodities (FICC) segment was a blemish. FICC revenue experienced a 10% year over year decline due to lower interest rates. Sequentially, however, the segment was up 29% as war uncertainty caused more client portfolio repositioning. “The one [bank] you really want to own is Goldman because that was actually a really good quarter. The one thing that wasn’t good was FICC,” Jim said on Friday. “They can change that, though.” Fixed income revenue was better at other banks like Morgan Stanley, which saw a 29% year-over-year increase. Energy markets’ volatility led to a spike in client engagement during the period. Bank of America’s trading unit had its best quarter in 15 years . Equities revenues surged 30% to $2.83 billion . Morgan Stanley also reported its best quarter in history for equities trading. Trading is a much smaller business for Wells than for the other big banks. Still, markets, which include trading, saw a 19% increase in revenue from a year ago. “We continue to grow our markets business amid a mixed and volatile trading environment,” Scharf said. “Client sentiment is cautious, but engaged as macro and geopolitical uncertainty has increased and clients have largely shifted to a more selective and defensive posture.” (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) 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