Major U.S. banks posted higher profits in the fourth quarter, supported by rising demand for loans, a sign that the U.S. economy remains resilient and supportive of future earnings growth for lenders.
Loan Demand Signals Economic Strength
Bank of America reported an 8% year-on-year increase in average loans, while its net interest income reached a record $15.9 billion, driven by higher returns on lending compared with deposit costs. JPMorgan Chase also saw average loans grow 9%, reinforcing confidence among investors that borrowing activity is strengthening across the economy.
Bank of America executives said loan growth was broad-based, spanning consumer and commercial borrowers, as businesses continued to invest amid economic expansion.
Outlook for Continued Growth
Bank of America expects loan growth to remain in the mid-single-digit range in 2026. Analysts at S&P Global Market Intelligence are similarly optimistic, citing stable macroeconomic conditions and favorable lending environments. They estimate overall U.S. bank loan growth reached 5.3% year-on-year by the end of 2025.
Citigroup reported a 7% increase in average loans, driven by its markets, personal banking, and services divisions. Wells Fargo also reported stronger lending, particularly in commercial banking, alongside revenue gains from auto and credit card lending.
Policy Risks and Credit Card Rate Concerns
Despite the positive outlook, banks face potential risks from geopolitical uncertainty and policy changes. One major concern is a proposal by President Donald Trump to cap credit card interest rates at 10%. Banking executives warned such a move could restrict access to credit and slow economic growth, particularly for higher-risk borrowers.
While some analysts argue banks could absorb lower credit card rates due to high profitability, executives said the lack of details makes it difficult to assess the true impact.
Market Reaction
Investor concerns over potential interest rate caps weighed on bank stocks, with the S&P 500 bank index falling about 1% in early trading. Despite the decline, the index had surged 30% over the course of 2025, reflecting strong overall performance.
