Could 2026 Be Another Big Year for Bank Stocks?

2025 was a phenomenal year for bank stocks. Fueled by a supportive interest rate backdrop and an increase in capital markets activity, the “Big Six” US banks generated an average share price return of 42%¹ – well ahead of the average return from the Magnificent 7.

Could 2026 be another big year for bank stocks? There are certainly reasons to be optimistic as we start the year. Here’s a look at the landscape the banks are likely to face in 2026.  

A Goldilocks Interest Rate Environment

Interest rates can have a major impact on banks’ profitability. And the setup here looks favorable as we start 2026. Recently, the US Federal Reserve has been lowering rates in an effort to stabilize the labor market and support economic growth (in December it lowered rates by 0.25%² to 3.50%–3.75%). However, long-term interest rates remain high due to risks around inflation and the fiscal deficit meaning that the yield curve is steepening.

Banks typically take in short-term deposits and lend them out as long-term loans. So, a steepening yield curve is ideal for these institutions. This backdrop allows them to profit from the natural maturity gap between their deposits and their long-term investments as the interest they pay on customer deposits decreases while the interest they charge on long-term products – like 30-year mortgages, auto loans, and corporate debt – stays elevated. Ultimately, this setup is a "goldilocks" scenario for bank profitability because it directly expands their primary source of income – net interest margin (NIM). 

One other positive of lower interest rates is increased borrowing activity. As US interest rates move towards 3%, businesses will look to refinance existing high-interest debt to lower their capital costs. Meanwhile, consumers will look to take advantage of more affordable credit, potentially sparking a surge in mortgage refinancing. This activity could generate significant additional fee income for banks.

Solid Economic Growth

Healthy economic conditions could also support bank profitability in 2026. In the third quarter of 2025, the US economy grew at a stronger-than-expected 4.3% annual rate³ – its fastest growth in two years – thanks to robust consumer spending, exports, and government spending. Looking ahead, economists at Goldman Sachs expect GDP growth of 2.6%⁴ for 2026. Given this economic growth, and the fact that the employment backdrop is relatively stable, the credit quality of bank customers should remain high in the near term. This should support earnings across the sector as it will allow banks to keep their loan loss provisions relatively low.

Deregulation Boost

Another factor that could give US banks a boost this year is deregulation. This is widely expected to help traditional banks compete more effectively with private credit firms. For the past decade, private credit firms have thrived because banks have been too restricted to compete in more obscure areas of the credit market. However, deregulation in the US could allow banks to hold less capital against loans as well as hold riskier, non-investment grade loans on their balance sheets, changing the game and unlocking a whole new source of revenue for the banks.

Exciting IPO Pipeline

In terms of capital markets activity, 2026 is shaping up to be a big year. Some rumored IPOs include:

• SpaceX: Elon Musk’s space company SpaceX is widely considered the "holy grail" of 2026 IPOs. The valuation here could be as high as $1.5 trillion⁵.

• OpenAI: Following a 2025 restructure from a non-profit to a for-profit entity, ChatGPT owner OpenAI is eyeing a late-2026 listing. Valuations are being discussed in the $800 billion to $1 trillion range⁶.

• Anthropic: A rival to OpenAI, Anthropic has reportedly hired legal counsel to prepare for an IPO. Analysts expect a valuation of between $200 billion and $350 billion⁷.

If these IPOs go ahead, they are likely to generate huge fees for banks such as Goldman Sachs, JP Morgan, and Morgan Stanley, which all have substantial investment banking divisions and are the go-to players for megadeals. Looking beyond this potential IPO activity, banks should also benefit from continued spending on AI infrastructure from tech companies like Microsoft, Amazon and Oracle – this is likely to lead to demand for specialized project finance, debt underwriting, and M&A services.  

High Equity Markets

While capital markets activity could provide a major revenue boost for banks this year, asset management could provide a steady, high-margin anchor for earnings. With global equity markets near all-time highs, banks with asset management divisions such as JP Morgan and Morgan Stanley are looking at substantial levels of income from their assets under management. Note that because the cost to manage these assets remains largely fixed, the additional income from rising markets falls almost entirely to the bottom-line. Ultimately, these divisions act as leveraged plays on the stock market.

Increased Market Volatility

Volatility in the equity markets could be another growth driver. Because many large-cap banks have trading divisions and can therefore capitalize on market turbulence. We saw this play out in the first half of 2025, when markets tanked on the back of tariff uncertainty and then rebounded. For the second quarter of 2025, JP Morgan’s Markets division posted revenue of $8.9 billion⁸ (up 15% year on year), as investors seized opportunities and hedged risks in response to tariff-related market volatility. Looking ahead, many market strategists expect to see increased equity market volatility in 2026. Factors that could create volatility include inflation, interest rates, labor market weakness, trade policies, and geopolitical shocks.

AI-Related Cost Reductions

While revenue drivers like interest rates, IPOs, and equity markets are a major area of focus for bank investors as we start 2026, investors should also consider the opportunities that exist in relation to structural cost reduction. In recent years, banks have been experimenting with artificial intelligence (AI) to see how it can increase efficiency. In 2026, we could see significant improvements in efficiency ratios (the cost to generate a dollar of revenue) as banks begin to deploy AI at scale. Note that PwC projects that banks fully embracing AI could see a 15 percentage-point improvement⁹ in their efficiency ratios.

Areas of banking that AI can enhance include:

Customer onboarding: AI can support the entire onboarding journey, from gathering ID documents and verifying them to triggering the final account opening in the back-end systems.

Customer service: The use of AI in banking has shifted from basic chatbots to agentic AI – autonomous systems capable of reasoning and executing multi-step tasks for customers. Note that Bank of America's "Erica" AI assistant now serves nearly 50 million users and has surpassed 3 billion lifetime interactions¹⁰. Critically, Erica now resolves 98%¹¹ of customer inquiries without human intervention, saving the bank thousands of hours of human work per day.

Lending: AI can analyze complex data to offer instant credit decisions for people who lack traditional credit scores.

AML investigations: AI can monitor transaction patterns and automatically produce Suspicious Activity Reports (SARs), allowing human investigators to simply review and sign off.

Regulatory scanning: Banks can use AI to scan thousands of pages of global regulatory updates daily, automatically flagging which internal policies need to be updated to stay compliant. 

Market Dynamics

Finally, another factor that could potentially boost bank stocks in 2026 is a broadening out of the market. This was a theme late in 2025 – investors rotated out of the Technology sector amid high valuations and talk of an AI bubble into other areas of the market such as Financials and Healthcare. If this trend persists in 2026, bank stocks could benefit. As we start the year, valuations remain relatively attractive – the average forward-looking price-to-earnings (P/E) ratio among the Big Six US banks is only 15¹², well below the market average.

Bank Stocks: A Compelling Setup

Put all this together, and there is a compelling case for bank stocks in 2026. While the spectacular returns of 2025 set a high bar, the fundamentals suggest that the rally in financials may still have room to run. The combination of a Goldilocks interest rate environment, a resilient US economy, high equity markets, and a significant wave of high-profile capital markets activity creates a compelling narrative for growth. Add in the massive efficiency gains promised by the agentic AI revolution and a favorable regulatory shift, and the tailwinds for the big banks appear stronger than they have been in years.

Footnotes:

¹LSEG, as of January 7, 2026

²Trading Economics, United States Fed Funds Interest Rate, as of January 7, 2026

³Bureau of Economic Analysis, Gross Domestic Product, 3rd Quarter 2025 (Initial Estimate) and Corporate Profits (Preliminary), as of December 23, 2025

⁴Goldman Sachs, The Global Economy Is Forecast to Post ‘Sturdy’ Growth of 2.8% in 2026, as of December 19, 2025

⁵TechCrunch, SpaceX reportedly planning 2026 IPO with $1.5T valuation target, as of December 9, 2025

⁶Reuters, Exclusive: OpenAI lays groundwork for juggernaut IPO at up to $1 trillion valuation, as of October 30, 2025

⁷Morning Star, SpaceX, Anthropic and 4 more companies that could make an IPO splash in 2026, as of December 31, 2025

⁸JPMorganChase, SECOND-QUARTER 2025 RESULTS, as of end of Q2 2025

⁹Pwc, The future of banking: How AI is reshaping the industry, as of October 16, 2025

¹⁰Atera, How Artificial Intelligence Is Transforming the Financial Services Industry, as of November 26, 2025

¹¹The Financial Brand, What Banks Can Learn from BofA’s Multi-Billion Dollar AI Bet, as of December 8, 2025

¹²LSEG, as of January 7, 2026