The banking sector takes center stage this week as America's six largest lenders prepare to unveil their fourth quarter 2025 financial results. Wall Street analysts anticipate substantial profit increases, primarily driven by a remarkable resurgence in investment banking activities and accelerated global dealmaking revenue during the final months of 2025.

Earnings Schedule and Timeline

The reporting cycle begins January 13 with JPMorgan Chase, America's largest lender, followed by a packed schedule of major announcements. The earnings releases are strategically distributed across three consecutive days to allow investors adequate time to analyze each institution's performance.

Investment Banking Revenue Surge

The fourth quarter results are expected to reflect a robust revival in mergers and acquisitions activity. According to Dealogic data cited by Reuters, investment banking revenue demonstrated impressive growth, rising 15% year-over-year to reach nearly ₹8,59,50,00,00,000 ($103 billion), representing the second-highest level recorded since 2021.

Total M&A transaction volume achieved remarkable momentum, hitting ₹4,25,85,00,00,00,000 ($5.1 trillion) in 2025, marking a substantial 42% increase from 2024 levels. This surge was propelled by numerous massive megadeals that characterized the year's dealmaking landscape. JPMorgan Chase secured the top position in investment banking league tables, while Goldman Sachs dominated M&A rankings.

Market Performance and Policy Impact

The S&P bank index demonstrated strong performance with a 30% surge in the previous year, maintaining momentum with a 3% gain in early 2026. However, the sector encountered immediate challenges following policy announcements from the Trump administration.

Bank shares experienced significant declines on Monday after President Trump proposed a 10% interest rate cap on credit cards for one year, effective January 20. The market reaction was swift and notable across major banking institutions.

Industry Outlook

Despite short-term market pressures, the banking industry maintains optimism regarding long-term growth prospects. Market participants anticipate benefits from Trump's pro-business agenda, including lighter regulatory frameworks and favorable tax policy changes. The sector expects that a more accommodating regulatory environment, combined with continued economic growth, will enhance lending profitability throughout the coming period.

India's banking sector has witnessed substantial transformation over the past two decades, with the credit-deposit ratio climbing from 53% in 2000-01 to 82% as of December 15, 2024, according to an SBI Research Report released on Monday, January 12. This upward trajectory reflects the ongoing financialisation of the economy and signifies better financial development leading to strong economic growth.

Banking System Scale Expansion

The Indian banking system has demonstrated remarkable scale expansion during FY05–FY25, with both deposits and advances growing manifold over this period.

The incremental credit-deposit ratio numbers crossed 100% in multiple instances, demonstrating increasing demand for credit despite lean deposit growth. Banks honored this demand by raising resources from alternative sources, highlighting the sector's adaptability and resourcefulness.

Post-Pandemic Recovery and Market Dynamics

Indian banks have exhibited strong post-pandemic balance sheet revival, with bank asset growth rebounding sharply to 94% of GDP compared to 77% in FY21. This recovery reflects renewed credit intermediation and financial deepening across the banking sector. The credit-deposit ratio specifically increased from 69% in FY21 to 79% in FY25, demonstrating accelerated lending activity.

Public Sector Banks have shown continued revival after experiencing secular decline since FY08. PSBs are gradually reclaiming market share, indicating successful balance sheet repair and renewed lending appetite. From a peak of 71% market share in FY08, PSBs experienced decline in both deposits and advances, but recent data suggests they are recovering their advances market share.

Sectoral Trends and Employment Growth

CASA (Current Account Savings Account) stability has masked divergent trends across different bank groups. While overall CASA ratios remained around 37%, private banks strengthened their CASA shares whereas foreign banks witnessed erosion in this segment.

Unsecured advances have expanded significantly from ₹2.00 lakh crore to ₹46.90 lakh crore, with their share rising to 24.50% in FY25 from 17.70% in FY05. PSBs accounted for half of the unsecured lending, followed by Private Sector Banks.

Banking employment nearly doubled over two decades, with the officer share rising from 36% to 76%, indicating skill intensification and preference for higher-value roles within the sector.

Asset-Liability Management Challenges

The report identified a gap between the maturity profile of deposits and advances, particularly in the 6 months to 1 year and 1-3 year time buckets. The 35% share of advances in the 1-3 years bucket indicates an increasing tendency of pre-payment among borrowers, presenting asset-liability management considerations for banks.