U.S. Bank Earnings Surge as Christopher Whalen Warns of Rising Market and Mortgage Risk

Whalen finds bank earnings jumped 12% as trading surged, while growing securities lending and overvalued mortgage assets raise new financial risks.

ESTERO, FL, UNITED STATES, September 2, 2026 /EINPresswire.com/ -- U.S. banks are making significantly more money, but some of the fastest growth is coming from areas that may also be increasing risk across the financial system.

Quarterly bank net income jumped to $90.1 billion in the second quarter of 2026, an increase of $9.7 billion, or 12%, from the prior quarter. Noninterest income rose $5.5 billion, or 6.1%, driven largely by higher trading revenue and fee income. WGA attributes part of that increase to the boom in AI stocks and related borrowing. At the same time, margin lending and borrowing tied to securities transactions is accelerating.

Those trends are among the key findings in the newly released IRA Bank Book Q3 2026 from Whalen Global Advisors LLC (WGA), the firm's quarterly outlook for the U.S. banking industry. The report examines the changing composition of bank revenue and earnings and identifies mounting risks in securities-related lending, nonbank finance and mortgage servicing assets.

“Loans to non-bank financial firms such as private credit sponsors have accounted for a large portion of bank loan growth over the past year,” notes WGA Chairman Christopher Whalen. “But in the most recent quarter, margin lending and borrowing related to securities transactions is actually growing faster than loans to non-depository financial institutions.”

The report also identifies another potential vulnerability developing in mortgage finance. WGA finds that bank-owned mortgage servicing rights (MSRs) have been significantly overvalued since the end of 2023.

“The valuation of mortgage servicing rights is not an issue confined to independent mortgage banks,” notes Whalen. “Banks are taking market share from independent mortgage banks (IMBs) in Q3, creating a possible risk event for both banks and their customers as credit conditions tighten.”
Whalen argues that current accounting and lending practices have enabled banks to lend against MSRs at valuations that may prove difficult to realize in the market. According to the report, some independent mortgage banks have recognized billions of dollars in noncash gains while using MSRs as collateral for bank financing, potentially increasing exposure as credit conditions tighten.

Copies of The IRA Bank Book Q3 2026 are available to subscribers to the Premium Service of The Institutional Risk Analyst. Standalone copies of the report are also available for purchase in the WGA store. Members of the media wishing to receive a courtesy copy of the report may contact info@rcwhalen.com.

About Whalen Global Advisors LLC
Whalen Global Advisors LLC is a Florida-based consulting, publishing and financial analytics firm. WGA publishes The Institutional Risk Analyst newsletter (ISSN 2692-1812), The IRA Bank Book (ISBN 978-0-692-09756-4) quarterly industry review, the WGA Bank Top 50 rankings and the WGA Precious Metals Top 25.
For more information, please contact: info@rcwhalen.com.

Alexandra Embers
The Embers Collective
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