The Banks’ Earnings are like Gold, But This is Not the Golden Age of Banking

In Other Words; It’s Not the Economy, Stupid; It’s the Market

From reading the headlines, you’d think we’re in a golden age of banking. JPMorgan Chase, the undisputed titan of the American financial system, just reported a staggering $14.4 billion in net income for the third quarter of 2025. The narrative practically writes itself: a resilient economy, a healthy consumer, and the genius of Jamie Dimon have converged to print money.

NOT!

That simple narrative is dangerously incomplete. Dig into the 10-Q like I did today, and a different, nuanced story emerges—one that has less to do with the bedrock of Main Street banking and everything to do with the speculative powerhouse of Wall Street. The truth is, JPMorgan’s record earnings are not a broad-based testament to economic vigor – nothing of the sort. They are a concentrated bet on, and a direct beneficiary of, extreme financial market valuations and dynamics.

Let’s break down where the money actually came from.

The Engine Room: Markets and Management Fees

The standout performers in JPMorgan’s quarter were unequivocally its market-sensitive divisions:

1. Corporate & Investment Bank (CIB): This unit was the quarter’s MVP, with revenue surging 25% year-over-year to nearly $9 billion. Look at the drivers:

o Equities revenue up 33%: This is a direct lever to the stock market rally. As valuations swell, so does client activity—trading, hedging, and financing.

o Fixed Income revenue up 21%: Fueled by active trading in a environment of tightening credit spreads and volatility.

o Investment Banking fees up 16%: The revival of ECM (Equity Capital Markets) and M&A is a function of boardroom confidence and, crucially, accessible market financing, not necessarily underlying economic growth.

The CIB’s 18% Return on Equity (ROE) is spectacular, but this is the kind of performance you see during periods of high market froth, not steady economic expansion.

2. Asset & Wealth Management (AWM): This segment posted a mind-boggling 40% ROE. How? Assets Under Management (AUM) ballooned 18% to $4.6 trillion. This wasn’t just from net inflows ($109 billion is impressive, but it’s a fraction of the total). The primary driver is the market’s performance itself. As the S&P 500 and other indices climb, the value of the assets JPMorgan manages—and the fees it collects on them—climb in lockstep. This is a pure pass-through of financial market appreciation.

The Supporting Act: Steady, But Not Spectacular, Core Banking

Now, contrast that with the traditional heart of a bank: the Consumer & Community Banking (CCB) division.

Yes, it was solid. Card spending was up 9%, and it posted a strong 35% ROE. But its contribution to the incremental profit surge was modest. Loan growth was a mere 1% year-over-year, and deposits were flat. That part of the story paints a picture of a resilient, but not booming, consumer—one that is spending, but not aggressively borrowing to do so.

The real story is in the mix. Roughly two-thirds of the year-over-year revenue growth came from the market-linked CIB and AWM divisions, not from an expansion of net interest income (the classic “lend long, borrow short” model).

The Peer Group Echoes the Story

This isn’t a JPMorgan-specific phenomenon; it’s a tale of two banking models in 2025.

• Goldman Sachs: Over 70% of its earnings come from markets and investment banking. Like JPM, it feasted on the trading and deal-making boom.

• Bank of America: Benefited significantly from the equity rally and wealth inflows via its Merrill Lynch arm.

• Wells Fargo: Stuck in the old world. With a heavier tilt to traditional lending and minimal trading exposure, its performance was solid but paled in comparison to its more market-sensitive peers.

The pattern is clear: the banks most levered to Wall Street’s engines are reporting record profits. Those tied to Main Street lending are merely doing well.

My Take: A Warning in the Numbers

JPMorgan’s 20% Return on Tangible Common Equity (ROTCE) is the envy of the industry. But we must be clear-eyed about its source. It reflects record margins in cyclical, market-sensitive activities, not a structural shift in the profitability of taking deposits and making loans.

This truth creates a vulnerability.

What happens when equity markets plateau or correct? The 33% surge in equities revenue and the performance fees from a $4.6 trillion AUM base are not recurring events; they are functions of the current market cycle. As credit costs continue to normalize (note the $3.4 billion in credit costs this quarter), the pressure on the core lending business will only increase.

The Bottom Line From My Perspective: JPMorgan’s stellar quarter is less a report on the health of the broad economy and more a direct readout of financial market sentiment. It is a testament to the bank’s brilliant diversification, allowing it to capitalize on market froth when it appears.

But for investors and policymakers, it should serve as a warning: believing that these record earnings signal fundamental, economy-wide strength is to mistake the speculator for the steward. The real test will come when the rocking party in the market ends, and JPMorgan, like everyone else, will have to dance to the foxtrot and waltz of the actual economy. They might even have to leave the dancefloor for a while.