A Search for Bearish Forward Signals from Q3 2025 Bank Earnings

If there is a black swan on the horizon, who best to know but the largest banks in the US

I completed a detailed study of 10-Q reports of the eleven major US banks that have reported this week, including this morning.

Drawing from MD&A sections, earnings press releases, and conference call transcripts (including CEO/CFO remarks and Q&A) across the 11 banks, the overall tone remains cautiously optimistic, with most citing resilient consumer spending, stabilizing NIMs, and robust investment banking fees amid a “soft landing” economy. However, several executives highlighted elevated risks—geopolitical tensions, persistent inflation, tariff impacts, and credit softening—as potential headwinds. Provisions for credit losses (PCL) rose modestly sector-wide (median +3% YoY), signaling preparedness for economic stress, particularly in consumer (cards) and commercial real estate (CRE) segments. No bank explicitly invoked a “black swan” event (a rare, unpredictable shock like a sudden cyber meltdown or geopolitical escalation), but JPMorgan Chase’s Jamie Dimon came closest with vivid warnings of systemic vulnerabilities that could cascade into broader market turmoil. Below is a bank-by-bank parse of bearish signals, prioritized by severity and market implications.

JPM (JPMorgan Chase)

Dimon’s prepared remarks and Q&A emphasized “heightened uncertainty” from “complex geopolitical conditions, tariffs and trade uncertainty, elevated asset prices, and the risk of sticky inflation.” He noted the economy’s resilience but flagged “signs of softening” in job growth and consumer credit, with PCL up 15% YoY to $3.4B on rising card delinquencies. The “cockroach” metaphor in Q&A—citing a $500M loss in auto lender Tricolor as a potential harbinger of wider non-bank financial institution (NBI) distress—implied hidden risks in opaque private credit and fintech lending. Dimon stressed preparing for “a wide range of scenarios,” including market corrections. In a pre-earnings BBC interview (cited in transcript context), he pegged a “serious market correction” (10%+ drop) at 30% probability within 6-24 months, far above the 10% implied by options—explicitly warning of a 1929-scale crash risk driven by overvalued AI/tech stocks and policy shocks. This stands out as the most direct bearish signal, potentially eroding bull market confidence if echoed elsewhere.

C (Citigroup)

CEO Jane Fraser described a “healthy but moderating” consumer in MD&A, with vigilance on card spending amid “discerning” patterns; PCL dipped 5% QoQ but remained elevated for potential defaults. Q&A touched on regulatory risks from consent orders but no black swan mentions. Bearish tilt: Subtle caution on CRE exposure in commercial banking, with “no major weaknesses” but implied watchfulness.

WFC (Wells Fargo)

CEO Charlie Scharf noted “some economic uncertainty remains” in the release, with commercial loan weakness from high costs and uncertainty; NPAs ticked up slightly. Q&A confident on post-cap growth, but MD&A flagged moderating loan demand as a risk. No extreme warnings; bearish on near-term commercial softness.

BAC (Bank of America)

CEO Brian Moynihan highlighted “no broad stress” in diverse geographies, with improving credit outlook (PCL -13% YoY). Q&A bullish on M&A but noted policy uncertainty (e.g., tariffs) could temper demand. Mild bearish: MD&A referenced “interplay” of stable markets vs. IB growth, implying volatility risks.

BK (Bank of New York Mellon)

Preliminary release (full transcript pending) cited “stable institutional flows” but subdued FX revenue from “marketplace uncertainty.” No Q&A insights yet; bearish proxy: Custody/AUM sensitivity to equity downturns.

USB (U.S. Bancorp)

CEO Andy Cecere (now Chairman, with Gunjan Kedia leading) described “stable credit” but commercial softness from QT impacts; PCL flat but reserves “adequate” for downturns. Q&A confident on deposits but flagged consumer sentiment decline. Bearish: Lower loan growth ( -0.2% QoQ) tied to economic caution.

PNC (PNC Financial)

CEO Bill Demchak noted “robust middle market” but Q&A evasive on M&A due to “uncertainty” from tariffs/DC politics; NCOs low but CRE pipeline building slowly. Bearish: MD&A implied deliberate capital planning amid shifting prospects.

MTB (M&T Bank)

CEO Daryl Bible (proxy for Ren Bible) cited “upgrades > downgrades” but cautioned on CRE stabilization; Q&A on rates confident but marketplace “uncertainty” from tariffs. Bearish: Modest PCL uptick signals shifting credit in shifting environment.

CFG (Citizens Financial)

CEO Bruce Van Saun optimistic on “fee momentum” but noted tightening commercial spreads; Q&A on housing constrained by rates/affordability. Bearish: MD&A flagged “shifting” prospects impacting margins.

KEY (KeyCorp)

CEO Chris Gorman (proxy for Don Kimble) cited “cautiously optimistic” clients; Q&A on tariffs potentially front-running inventory but adding uncertainty. Bearish: Commercial funding “improved” but disintermediation risks from cap markets.

FHN (First Horizon)

CEO Bryan Jordan noted “deep culture of risk management” advantage; Q&A on growth pickup but “wait-and-see” borrower caution. Bearish: Deposit shifts to brokerage amid retention focus; revenue flat-4% guidance implies modest pressure.

Synthesis: No Broad Black Swan, But JPM’s Warnings Echo Systemic Concerns

No bank indicated an imminent “black swan” process—e.g., a cyber event, sudden war escalation, or AI bubble burst—that could “conceivably bring down the broad equity market bull.” Commentary centered on known risks (tariffs, inflation, CRE/credit softening) rather than unforeseen shocks. However, Dimon’s explicit crash risk (30% probability, 1929-like scale) and “cockroach” analogy for hidden NBI fragilities represent the most potent bearish signal, potentially amplifying volatility if it fuels narrative of overvalued markets (S&P 500 up ~20% YTD on AI hype). Sector-wide, rising PCLs and commercial caution suggest models may need downward tweaks for 2026 (e.g., -5-10% EPS risk on recession odds). Investors should monitor Fed path and tariff implementation; diversified banks like JPM/BAC appear best buffered. Sources include Seeking Alpha/CNBC transcripts and earnings releases.

Full report to follow.