Evercore sees softer third-quarter bank guidance as debt markets weigh on capital markets activity
HONG KONG. Capital markets activity fell short of expectations in July against the backdrop of a broad retreat in debt issuance, with overall investment banking volumes declining 6% year over year as lower debt capital markets…
Key takeaways
- Evercore expects banks' third-quarter investment banking and trading guidance to fall below consensus estimates.
- Overall investment banking volumes fell 6% year over year in July as debt capital markets and syndicated lending dropped 18%.
- Equity capital markets volumes rose 119% and M&A gained 11% in July, but not enough to offset the debt-side contraction.
- Trading improved after a slow July, with FICC measures running at low- to high-double-digit year-over-year growth and average quarter-to-date margin balances 32% higher than a year earlier.
- Evercore expects wealth management and trust fee commentary to meet or come in slightly below expectations.
HONG KONG. Capital markets activity fell short of expectations in July against the backdrop of a broad retreat in debt issuance, with overall investment banking volumes declining 6% year over year as lower debt capital markets activity weighed on the aggregate. Evercore, in its August 2026 Capital Markets Monthly report, now expects banks' third-quarter investment banking and trading guidance to come in below consensus estimates. Quarter-to-date performance indicators are running below where they would need to be to support current Street earnings-per-share forecasts, the firm said.
The divergence within the complex reflects the broader cycle and the current demand environment for debt. Debt capital markets and syndicated lending fell 18% year over year in July. Equity capital markets volumes climbed 119% and M&A activity gained 11%, but neither was enough to offset the contraction on the debt side.
Trading indicators and margin balances
Trading showed improvement after a slower July. Most fixed income, currencies and commodities measures were running at low- to high-double-digit year-over-year growth rates on a quarter-to-date basis, according to Evercore. Within FICC, foreign exchange trading volumes increased 17% year over year, commodities rose 17%, credit gained 10%, and rates activity was up 2%. Equities were mixed: CBOE volumes fell 4% year over year, while retail activity increased 43% and options rose 14%.
Margin balances held relatively steady despite some deleveraging in artificial intelligence-related positions during July. Average quarter-to-date margin balances were 32% higher than a year earlier.
The guidance call for banks
The guidance read-through for banks is sector-wide. Evercore expects investment banking and trading guidance to fall below consensus forecasts when third-quarter reporting begins. On wealth management and trust fees, the firm expects commentary to either meet or come in slightly below expectations.
Investors appear to have absorbed some of the slowdown already, Evercore noted, with bank shares and valuation multiples adjusting alongside weaker activity data and higher interest rates and oil prices. Broader market data from the period showed equities up 3% month over month while fixed income markets were unchanged. Average H.8 loan balances and deposit balances each grew 6% year over year.
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