By Nicholas G. Miller
Banks are set to kick off first-quarter earnings season as the war in Iran and the panic running through private credit pose potential risks to the economy.
Analysts expect that banks' run of strong earnings in 2025, boosted by ramping deal activity and a favorable regulatory environment that has eased fees and streamlined examinations, is set to continue. But new concerns have emerged about how inflation risk from the conflict in the Middle East and the outflow of capital from private-credit funds could hurt banks.
Goldman Sachs is set to report on Monday, while JPMorgan Chase, Citigroup and Wells Fargo are scheduled to report their earnings prior to the bell Tuesday.
JPMorgan analysts said in a note this week that the first quarter saw a range of issues crop up that banks will have to address. Investment-banking activity has slowed due to the volatility in markets driven by the war in Iran, while the surge in oil prices risks pushing up inflation, which, if sustained, "will erode lower and middle income consumers and may impact other spending," the analysts said.
Higher tax refunds this year could also boost inflation, the analysts said.
JPMorgan Chief Executive Jamie Dimon said in his shareholder letter this week that the war in Iran could drive ongoing oil and commodity price shocks and force the reshaping of global supply chains, leading to stickier inflation and higher interest rates than markets expect.
"And high asset prices, which certainly feel good in the short run, create additional risk if anything goes wrong," Dimon said.
Additionally, the private-credit industry, which banks loan money to, is in turmoil. Investors, made anxious by a handful of high-profile defaults in the past year and the potential impact of artificial intelligence on the software companies that funds lend to, have been pulling their money out of once-hot private-credit funds.
Blue Owl Capital recently said investors in two of its biggest private-credit funds asked to pull out some $5.4 billion in the first quarter. Blue Owl opted to cap redemptions in both funds at 5%, a reversal from its decision in January allowing shareholders to redeem 15% from one of the funds.
Banks have limited but still meaningful exposure to private credit, having increased their lending to non-depository financial institutions, or NDFIs, including private-credit firms, in recent years.
For banks, the key risk is the potential for private-credit funds to have to sell their loans at cut-rate prices in order to pay out redemption requests from investors. "Some funds should have enough liquidity to handle these but details are not known," JPMorgan analysts said.
Dimon said credit standards are weakening, which he said will cause higher-than-expected losses on all leveraged lending when a credit cycle inevitably arrives.
Banks face additional risk in their exposure to software companies, which could struggle as enterprises opt for rapidly improving AI tools instead of buying software. Most banks have limited direct loans to the software industry but are exposed through private credit and collateralized loan obligations, JPMorgan analysts said in their note.
Still, despite these risks, analysts expect that banks for the moment will continue to post strong results. Truist analysts said in a note they expect solid first-quarter results with an improvement in loan growth, strong capital-markets activity, stable credit metrics and continued capital return.
"Despite the macro factors that have dampened bank stock sentiment, we still see scope for modest positive [earnings-per-share] revisions ahead," they said.
Write to Nicholas G. Miller at nicholas.miller@wsj.com.
(END) Dow Jones Newswires
April 10, 2026 13:54 ET (17:54 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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