Goldman Sachs and JPMorgan Report Record Quarterly Profits on Trading Revenue Surge
Both banks beat Wall Street expectations thanks to currency and commodity trading. Shares rose 4-5% in after-hours trading.
Record profits at Goldman and JPMorgan: why trading is hitting records and bankers are bracing for a storm
The Bottom Line: What's Really Happening
The official version you see in headlines reads "Goldman Sachs and JPMorgan report record quarterly profits on trading revenue surge." That's true, but only half the story. In reality, the record results mask a fundamental divergence in the strategies of the two giants — and that divergence reveals where the market is headed.
The first quarter of 2026 was the best in history for investment banks in equity trading revenue. Goldman Sachs reported revenue of $17.23 billion and earnings per share of $17.55, with investment banking fees up 48% year-over-year. JPMorgan and Citigroup also reported record quarters for their trading divisions.
But here's what gets overlooked: Goldman and JPMorgan achieved record results through completely different paths. JPMorgan increased total assets by nearly 11% over the quarter, but its risk-weighted assets barely changed — the bank earned more without taking on additional risk. Goldman, on the other hand, grew its balance sheet by 14% — the largest quarterly increase in three years — and significantly boosted risk-weighted assets.
An insider fact you won't see in press releases: the difference in approaches is visible through the Value at Risk (VaR) metric — the amount a bank could lose on a bad day. At JPMorgan, this figure remained virtually unchanged from the fourth quarter and fell 26% compared to the first quarter of 2025. At Goldman Sachs, the same metric rose 40% and 23%, respectively. In other words, Goldman bet on aggressive risk-taking, while JPMorgan focused on efficiency. So far, both have won, but the stakes for the second quarter are different.
Timeline and Context
To understand how the banks reached record results and what lies ahead, let's look at the chronology of recent events.
| Date | Event | Significance for Banks |
|---|---|---|
| Late February 2026 | US and Israel launch military operations against Iran | Explosive volatility in commodity markets |
| April 2026 | Goldman reports Q1: revenue $17.23B, EPS $17.55 | Shares rise, but bond trading disappoints |
| April 2026 | JPMorgan and Citi also report record quarters | FICC trading strong across the board, except Goldman in bonds |
| June 11, 2026 | JPMorgan issues research note: tactical upgrade of GS and MS to outperform | Timeline until earnings on July 15-16 |
| June 14, 2026 | Goldman adjusts JPM price target from $226 to $225 | Formal move, buy rating maintained |
What's especially important: the source of record volatility was not just the Middle East conflict, but also the IPO boom. SpaceX conducted the largest public offering in history at $75 billion, placing 555.6 million shares at $135 and achieving a valuation of $1.77 trillion. Goldman and Morgan Stanley served as joint lead underwriters. JPMorgan, commenting on the deal, explicitly stated that the market underestimates the "multiplier effect" of mega-IPOs: the primary listing boosts secondary trading, derivatives, and financing.
Winners and Losers
The direct winners are obvious: shareholders of Goldman Sachs and JPMorgan. Goldman shares closed Thursday at $1,037, Morgan Stanley at $213. JPMorgan set a target on Goldman at $900, raising its adjusted EPS forecast by 5%. Both banks expect a strong second quarter: JPMorgan forecasts equity trading revenue up 21% year-over-year, FICC up 7%, and total market revenue up 14%.
However, there are also losers — other investment banks that failed to capitalize on the moment. Goldman disappointed investors in bond trading, while JPMorgan and Citi showed strength across nearly all products. Goldman "allowed its traders to take on much more risk, but its traders in government bonds and mortgage-backed securities performed significantly worse than last year."
A separate group of losers: European investment banks. Barclays and Deutsche Bank trade at P/E multiples in the mid-single digits, while US giants trade in the 15-20 range. The valuation gap reflects the divergence in earnings momentum: US banks benefit from explosive trading volumes on domestic exchanges and the IPO multiplier effect, which Europeans simply lack.
On the winning side are also hedge funds and institutional clients actively hedging risks. Uncertainty around oil prices and geopolitics in the Persian Gulf have led to a significant increase in hedging demand. Goldman and Morgan Stanley, deeply involved in commodity markets, directly benefit from this surge in activity.
What the Media Isn't Saying
The biggest omission concerns the fact that record trading revenues are a double-edged sword. Yes, volatility brings profits. But it also creates huge hidden risks not reflected in reports. Goldman increased VaR by 40% — meaning on a "bad day," the bank could lose 40% more than a quarter earlier. As long as the market moves in the right direction, this generates profits. But when the direction changes, losses will be substantial.
The second hidden factor is regulatory. The Federal Reserve in April proposed changes to capital requirements that, according to estimates, would reduce overall requirements for the largest banks by nearly 5%. Goldman likely felt comfortable increasing risk in anticipation of these relaxations. But JPMorgan, conversely, believes the changes will require it to hold 4% more capital, costing an additional $20 billion. This is a fundamental divergence in assessing the regulatory future, and it is not reflected in current stock prices.
The third insight concerns JPMorgan itself as a market analyst. The bank issued a tactical upgrade for Goldman and Morgan Stanley with a horizon until earnings on July 15-16. This is an acknowledgment that the official rating for both banks remains neutral, but the short-term catalyst (SpaceX IPO and volatility) outweighs fundamental risks. In other words, JPMorgan is telling clients: "Buy now, but don't hold for long." This is a subtle signal that most retail investors miss.
Forecast: Next 30 Days and 90 Days
Next 30 Days (through mid-July 2026)
The key dates are July 15, when Goldman Sachs reports second-quarter earnings, and July 16, when Morgan Stanley reports. Expectations are already priced in: JPMorgan forecasts strong results. If the banks confirm forecasts (or beat them, as in Q1), shares could gain another 3-5%. If they disappoint — especially Goldman in bond trading — the correction could be sharp.
Key risk: high valuations. Goldman and Morgan Stanley trade at P/E in the upper part of the 15-20 range, while European competitors are in the mid-single digits. Any hint of a slowdown in trading activity or normalization of volatility could trigger a downward revaluation.
90 Days (through mid-September 2026)
By September, the situation could change dramatically. Goldman Sachs lowered its 2027 oil price forecast to around $80 per barrel, outlining scenarios: Brent near $90 in Q4 2026, downside to $60-70 on weak demand, and upside above $110-140 if disruptions in the Strait of Hormuz persist. For bank trading desks, this means volatility will persist — but its direction will become key.
Base case: Q2 will be strong, but in Q3, seasonal slowdown and possible escalation or de-escalation in the Middle East will create a new wave of uncertainty. Bank stocks, which have risen on expectations, could be vulnerable to a 10-15% correction if the market begins to price in a US economic slowdown and a decline in IPO volumes.
The main takeaway for investors: current records reflect a "perfect storm" of volatility and issuance boom. But no storm lasts forever. The question is not whether banks will make money in Q2, but what happens when volatility subsides and normalizes.
Editorial Forecast
Asset: Goldman Sachs shares (GS). Direction: up over the next 72 hours on positive expectations ahead of the July 15 earnings report. Key level: a break above $1,050 opens the way to $1,070-1,080. Confidence level: moderate (55%). Main risks: premature profit-taking by large institutional investors after the Q1 rally, and any negative Fed commentary on capital requirements. Also watch for SpaceX news — any delays or issues with the offering could hit sentiment.
— Editorial Team
