From Wall Street to Tokyo, artificial intelligence (AI) is heralding a new era for the global banking sector.

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As the earnings season wraps up, the revenue trends for the global banking industry in the first half of the year are coming into sharper focus.

U.S. investment banks are "soaring," European banks are experiencing divergent paths, and Japanese banks are achieving notable short-term breakthroughs. These trajectories converge at a single focal point: a global capital reallocation triggered by the AI boom.

According to the Financial Stability Board (FSB), there are 29 global systemically important banks (G-SIBs). Excluding five Chinese institutions, among the remaining 24 major overseas banks, eight are headquartered in the U.S., 13 in Europe, and three in Japan.

As of mid-August, except for the unlisted French BPCE Group, the other 23 banks have released their first-half 2026 financial results (April-June for Japan). Scrutinizing these 23 earnings reports, a distinct pattern emerges...

Wall Street Investment Banks Reap Rewards from AI Investment and Financing Boom

In the first half of 2026, the AI wave sparked explosive growth in the performance of U.S. investment banks.

Goldman Sachs reported first-half revenue of $37.565 billion, a 26.72% increase year-on-year; net profit attributable to shareholders reached $12.258 billion, surging by 44.88%. In the second quarter alone, net profit skyrocketed 78% year-on-year, with return on equity (ROE) and return on tangible equity (ROTE) hitting 23.5% and 25.5%, respectively—both record highs and marking the strongest quarterly performance in the company's history.

Morgan Stanley also delivered impressive results: first-half net profit of $11.148 billion, up 41.9%, with a 57% increase in the second quarter.

This performance was propelled not by traditional net interest margins but by a surge in investment banking activities.

In the second quarter alone, Goldman Sachs and Morgan Stanley's investment banking revenues reached $3.4 billion and $2.4 billion, respectively, with year-on-year growth exceeding 50%. Goldman Sachs advised on announced mergers and acquisitions (M&A) deals totaling over $1 trillion in the first half, setting a record for the fastest pace in the same period.

Behind this was a palpable M&A frenzy: global M&A volume surpassed $3 trillion in the first half of 2026, a 44% increase year-on-year and marking a record high for the period. "Mega-deals" exceeding $10 billion contributed nearly half of the total transaction value.

A landmark case was SpaceX's initial public offering (IPO): filing in April and listing on NASDAQ on June 12, raising approximately $75 billion with a valuation of $1.77 trillion—the largest IPO in global history. Goldman Sachs, Morgan Stanley, Bank of America, Citi, and JPMorgan Chase served as joint lead underwriters.

The "easy wins" extended beyond investment banks. Second-quarter net profits for Wall Street's six largest banks all achieved double-digit growth, with the highest increase reaching 78%. Revenues also rose, driven by steady net interest income and a surge in more flexible non-interest income, while non-performing loan ratios declined, reflecting synchronized improvements in asset quality and performance.

However, divergences persist.

JPMorgan Chase continued to solidify its position as a comprehensive banking powerhouse, with total assets surpassing $5 trillion—equivalent to the combined assets of Citigroup and Wells Fargo—and first-half net profit of approximately $37.6 billion. Bank of America and Citigroup demonstrated more balanced growth, with strong performances in both investment banking fees and wealth management. Bank of America's assets under management hit a record $2.3 trillion.

In contrast, Wells Fargo, which focuses on traditional lending, saw more moderate growth, with a 12.2% increase in first-half net profit, lagging behind its peers. Meanwhile, asset custodians BNY Mellon and State Street, less sensitive to interest rate cycles, achieved net profit growth of 28.3% and 38.2%, respectively, delivering solid results.

Analysts point out that the current macroeconomic environment may not sustain this strong performance indefinitely. The key driver has been capital market activity directly boosting large banks' revenues and profits.

European Banks Embrace Cost-Cutting Amid Sluggish Growth

While Wall Street thrives on business explosions, European banks across the Atlantic have taken a different path: focus, streamlining, and efficiency.

Performance varied widely among Europe's 13 G-SIBs. Leading institutions such as HSBC, Santander, Barclays, and Standard Chartered generally achieved positive growth, while ING Group saw a 20.98% year-on-year decline in net profit, and Italy's UniCredit dipped slightly by 2.71%, becoming rare underperformers.

HSBC's earnings report is representative: first-half pre-tax profit reached $19.522 billion, a 23% increase year-on-year and exceeding market expectations. Its annualized return on tangible equity (RoTE) hit 19.1%, surpassing its 17% target.

This was driven by HSBC's ongoing cost-cutting measures, provision releases, and accelerated execution of its "Asia-focused" strategy. In recent years, HSBC has concentrated resources in faster-growing Asian markets by privatizing Hang Seng Bank and divesting non-core businesses such as UK life insurance and German custody services.

Standard Chartered capitalized on the window of RMB internationalization, becoming one of the first foreign banks to access cross-border digital RMB services. Its network spans Hong Kong, Singapore, Thailand, the UAE, Qatar, and Brazil. First-half operating income reached $11.604 billion, a record high.

UniCredit, headquartered in Milan, Italy, responded to uncertainty with "subtraction": divesting regional businesses to mitigate geopolitical risks while accelerating its acquisition of Germany's Commerzbank, aiming to penetrate Europe's largest economy. By late July 2026, its stake in Commerzbank had risen to 48%.

Notably, while European banks' overall growth lags behind that of Wall Street, market sentiment toward the sector has warmed. Goldman Sachs analysts noted in a recent industry report that investors are shifting their focus from interest rates and credit to growth and efficiency, with AI-driven cost savings becoming a new magnet for capital.

With Europe lacking large tech firms, many investors are seeking AI beneficiaries within traditional banking. Goldman Sachs estimates that European banks' costs will grow at a compound annual rate of just 1% from 2025 to 2027, with cost-to-income ratios improving by approximately 130 basis points annually—meaning banks are generating more revenue with fewer expenses.

This "cost-cutting" logic is reflected in organizational restructuring at major European banks.

In March 2026, HSBC appointed David Rice as its first Chief AI Officer. CEO Georges Elhedery stated the goal is to lift RoTE above 17% by 2026–2028, primarily through process automation and back-office streamlining.

UBS acted earlier, appointing Daniele Magazzeni as its first Chief AI Officer in October 2025, with Magazzeni assuming the role in January 2026. UBS management even declared, "AI is UBS's top priority."

Japanese Banks Achieve Short-Term Breakthroughs Amid Interest Rate Hikes

While U.S. banks profit from trading and European banks from cost-cutting, Japan's three major banks are riding a wave of interest rate hikes.

Japanese banks' fiscal years begin in April, differing from the U.S. and Europe. From April to June 2026, as the Bank of Japan raised its policy rate to 1.0%—the highest in 31 years—Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group saw historic turnarounds: Mitsubishi UFJ's quarterly net profit hit ¥809.4 billion, up 48% year-on-year; Mizuho's net profit reached ¥422.9 billion, up 46%; and Sumitomo Mitsui's net profit rose 33% to ¥501.4 billion.

The key driver was a significant widening of domestic lending spreads.

For Mitsubishi UFJ, net interest income surged 28% year-on-year to ¥882.4 billion in the quarter. After decades of ultra-low or negative interest rates, Japanese banks had long relied on fee income and overseas operations to offset thin lending margins. Now, as interest rates rise, suppressed "spread dividends" are finally being unlocked—the root cause of the three banks' 30–50% net profit growth.

Compared to their U.S. and European counterparts, Japanese banks' AI narratives focus more on deep integration of business and technology: Mitsubishi UFJ partnered extensively with OpenAI to advance an "AI-native" transformation, while Sumitomo Mitsui leveraged its digital account platform Olive to drive personal deposit growth. As rate dividends and digital transformation synergize, Japanese banks are emerging from the "lost three decades" to pursue new growth narratives.

Cyclical Concerns Emerge, but AI Remains the Long-Term Theme

Reviewing the performance trends in the U.S., Europe, and Japan, they all trace back to a single source: the AI capital expenditure cycle is reshaping global banking's revenue structures and profit curves through three pathways—M&A financing, cost efficiency, and wealth management.

In the first half of 2026, multiple international banks added "Chief AI Officer" roles to their core management teams, with HSBC and UBS being prime examples. Investment scales are also substantial: Bank of America's 2026 tech budget is approximately $13–13.5 billion, with roughly 30% allocated to AI and other new initiatives.

These investments are already yielding tangible returns. Bank of America's explosive growth in wealth management in the first half was underpinned by its leading digital strategy: its virtual assistant Erica served 24 million clients, with digital sales accounting for 70% of total sales. Efficient digital engagement significantly boosted client asset retention. Its Global Wealth and Investment Management division saw second-quarter revenue surge 16% year-on-year to $6.9 billion, a record high, with assets under management growing 17% to $2.3 trillion.

Beyond driving growth, AI is directly cutting operational costs and enhancing efficiency. JPMorgan Chase plans to deploy "more powerful AI agents" in late 2026 across retail, corporate, and trading scenarios. Citigroup reduced account opening document review time from one hour to 15 minutes using AI, boosting efficiency by 75%, while aiming to cut outsourcing from 50% to 20% to strengthen in-house capabilities.

However, this boom is not without concerns.

Analysts warn that high interest rates are increasingly suppressing the real economy, with overall U.S. growth expectations slowing. Data from the U.S. Bureau of Economic Analysis shows real GDP grew 2.1% year-on-year in 2025, down from 2.8% in 2024 and 2.9% in 2023. The IMF forecasts U.S. growth at 2.3% in 2026, still below 2023–2024 levels.

This suggests that the capital market activity driving Wall Street's strong performance may not last. AI-related M&A deals also show a clear "K-shaped" divergence: mega-deals exceeding $10 billion account for nearly half of total transaction value, while smaller deals have contracted significantly. If the pace of mega-deals slows, earnings elasticity could decline.

References:

"Goldman Sachs, Morgan Stanley Net Profits Surge Over 40% as AI Wave Ignites U.S. Investment Banking Performance" and "Net Profit Growth Capped at 78%: Can Wall Street's Six Major Banks Sustain Performance?" 21st Century Business Herald;

Goldman Sachs Group 2026 Interim Results Announcement;

Morgan Stanley, JPMorgan Chase, Bank of America, Citigroup, Wells Fargo Q2/Interim 2026 Financial Reports;

HSBC Holdings, Standard Chartered Group, UniCredit 2026 First-Half Results Announcements;

Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, Mizuho Financial Group Q1 2026 (April–June) Results Announcements;

London Stock Exchange Group (LSEG), Dealogic 2026 First-Half M&A Data;

PwC 2026 Global M&A Outlook Report;

U.S. Bureau of Economic Analysis (BEA), International Monetary Fund (IMF) Macroeconomic Data.

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