The big bank earnings season opened with beats across the board on Q4 2025 results. JPMorgan posted record net income. Goldman Sachs reported investment banking revenue recovery. But the forward guidance told a different story: net interest margin compression in 2026 as rate cuts materialize is the consensus expectation, and the banks are not being coy about it.
A bank earnings beat that is accompanied by forward NIM compression guidance is a complicated thing to analyze because the market has to decide which one to weight. The current earnings are real and strong. The forward NIM math is also real: as the rate cycle turns down, the spread between what banks earn on loans and what they pay on deposits compresses. The mega-cap banks have diverse enough revenue streams to absorb this. The regional banks, which are more asset-sensitive and less diversified, face a more direct headwind.