What to watch as the biggest US banks report earnings

Financials ended 2025 on a tear, perhaps getting a bit over their skis in pricing in a global economic reacceleration thanks to continued fiscal stimulus and the waning impact of tariffs. Every morning this week, we’ll be inundated with news about how America’s banks — from the gigantic, systemically important ones to the small regional players — performed in the first quarter of the year.

Goldman Sachs, which kicked off the reporting period for banks, is taking its lumps after reporting lower-than-expected sales and trading revenue for its fixed income, currencies, and commodities division. The stock was down as much as 4.6% in early trading before paring losses to about 3.3% during the conference call.

While trading results may get the early headlines, management’s color on the economic outlook, their exposure to private credit, and whether they’re seeing impacts on consumers or businesses from higher fuel prices will do much more in determining the market mood. And, thanks to the reported emergency meeting between bank CEOs, Fed Chair Jerome Powell, and Treasury Secretary Scott Bessent last week, you can bet cybersecurity considerations will be on the agenda, too.

Private credit funds have been facing investor outflows (which, in many cases, they’ve been limiting) in light of their elevated exposure to software companies. Anthropic has blown a Claude Cowork-shaped hole in the rosy assumptions about recurring revenue streams generated by software firms. In turn, the pricing of many of these funds indicates the market doesn’t believe the loans are worth what these asset managers say they’re worth.

So, why does this matter to banks? For one, banks are lenders to private credit funds. Last month, JPMorgan curbed some of its exposure to the space while marking down some of these loans, which, as the name suggests, aren’t publicly traded. The second reason is that credit stresses anywhere, if severe enough, can often impact the provision of credit more broadly.

But maybe the most important reason private credit will be a huge part of the narrative this week is because the media is mildly obsessed with it. Peep this chart of monthly stories about the asset class versus the price of an ETF of business development corporations (BDCs) — the providers of private credit:

To that end, during the earnings call, Goldman Sachs CEO David Solomon called out “the media headlines” as driving “an enormous amount of negative sentiment around private credit,” and said the space continues to be attractive to investors with a medium- or longer-term view.

Last month, when Deutsche Bank revealed a $30 billion exposure to private credit in its annual report, the stock suffered its biggest one-day loss since April 2025. But, besides a few headline-grabbing days, that’s not generally what we’ve seen. The three-month correlation between bank ETFs and an ETF that holds BDCs is not particularly strong — both outright and relative to their five-year histories — and while correlations picked up somewhat in March, that was a) mostly a result of the war causing more stocks to swing in unison, and b) off around a multiyear low. Quite simply, if the travails of private credit are A Big Deal, then it should be a driving force for not only the BDCs that extend this financing, but the banking industry as a whole.

“Contained” is one of the few words in finance that’ll elicit more groans than “transitory.”

But, so far, private credit’s problems have stayed mainly, well, private. Or, at the very least, it’s currently more a story of technological disruption than nascent financial contagion.