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Cautious Bank Outlook Weighs on Stocks Despite Strong Earnings

Strong bank earnings in North America and Europe contrast with growing investor concerns about 2027.

Despite strong earnings and healthy credit markets, bank investors are increasingly concerned about the sector’s 2027 outlook.

JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Morgan Stanley, UBS Group AG, HSBC Holdings, and Deutsche Bank AG have cited macroeconomic volatility and political uncertainty.

While profits at nearly all these banks are up from a year ago, doubts are emerging about the payoff from tens of billions of dollars in data center financing and about the prospect of further interest rate hikes.

A year ago, investors were more optimistic about the sector ahead of the Federal Reserve’s December 2025 interest rate cut. Data center spending was viewed as a growth opportunity, but it is increasingly seen as a potential risk if investments in AI fail to deliver expected returns.

On the plus side, yields on 10-year U.S. Treasury notes fell below 5% in recent weeks after exceeding that level in the third quarter, and the Fed held interest rates steady at its October meeting. Banks continue to benefit from robust economic activity, active dealmaking and strong wealth management businesses.

“It is a very, very favorable environment for banks,” said Ian Lapey, manager of the Gabelli Global Financial Services Fund (GFSIX), which holds several U.S. banks, including First Citizens BancShares Inc. and Citigroup Inc., as well as European banks such as Barclays, Banco Bilbao Vizcaya Argentaria S.A. (BBVA), ING Groep N.V., Banco Santander and Société Générale.

“You’re seeing strong revenue growth across the board, including fee income, investment banking revenues, advisory revenues, and net interest income, which is also growing,” Lapey said. “The credit environment has been really benign for several years.”

Most banks are also buying back stock, a sign of confidence in the economy. Employment levels and consumer spending in the U.S. have remained resilient despite frustration over rising living costs.

Challenges for 2027

Lapey said banks face a more challenging environment in 2027 as revenue growth normalizes and risks associated with certain types of debt rise. Potential cracks in credit quality could emerge, especially for U.S. banks, amid concerns about data center financing and exposure to private credit, he said.

While U.S. banks have greater exposure to private credit and AI data-center financing, European banks are better positioned to generate cash, repurchase shares, and increase dividends, he said.

Among the banks’ forecasts, UBS expects “a more typical sequential seasonal moderation in transaction volumes” in the coming year, and its current global banking pipeline is expected to help it increase revenue sequentially, assuming constructive markets.

JPMorgan Chase, which raised its net interest income outlook, said it expects “pretty stable” corporate credit conditions.

“Obviously, there are issues out there, and we’ll have to see how they flow through — the performance of our borrowers, energy prices, fuel inputs, and higher rates. These are all things that will create challenges in different pockets of the economy,” JPMorgan Chase CFO Jeremy Barnum said on the bank’s call with analysts. “It’s very early, obviously, but in general, we think corporate balance sheets are in quite good shape. There’s been resilience, but there are a lot of pressures building up. So, we’ll have to see what happens.”

Such uncertainty has weighed on bank stock sentiment, prompting investors to react more negatively to results that fall short of expectations.

NatWest shares fell nearly 9% on Oct. 30 after the bank reported nearly a 100% increase in impairment charges, which bit into profits.

“This is sort of a classic Wall Street overreaction,” Lapey said. “They actually put up a return on tangible equity of 21.6%, which makes them among the most profitable banks in the world. I’d say the outlook for that company is quite good.”

Ian Lapey of Gabelli Funds says banks’ Q3 results revealed solid businesses, but the sector could face more headwinds next year.

Steve Gelsi is a contributing writer based in the U.S.

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Court weighs Trump’s appeal in the Stormy Daniels hush money case

New York appeals judges grilled President Trump’s lawyers and prosecutors Thursday about his bid to erase his historic hush money conviction, but the court didn’t signal how or when it would rule.

The judges delved into legal theory, presidential immunity and some evidence in Trump’s 2024 trial. Convicted of 34 felony counts of falsifying business records to obscure a $130,000 payment to adult film performer Stormy Daniels, Trump denies any wrongdoing. He has turned to state and federal courts in hopes of unwinding the verdict.

Trump, who denounced the case on social media as recently as September, didn’t attend Thursday’s court session.

Much of the back-and-forth focused on prosecutors’ theory that the hush money was meant to keep unflattering information about Trump away from the electorate before the 2016 vote, and that it amounted to an illegal campaign contribution under the Federal Election Campaign Act.

Trump lawyer Robert Giuffra Jr. told the judges that Manhattan Dist. Atty. Alvin Bragg’s office has no place tying a case to a federal election law.

“We think it’s the most obvious ground for reversal,” he said.

Prosecutors argued that they weren’t prosecuting an alleged federal campaign finance offense, but rather presenting it as a factor underlying what they claim was a Trump-orchestrated conspiracy.

“So are you relying upon FECA in order to prove your falsifying business records [charge]?” Justice Troy Webber asked.

“Only partially,” replied Bragg’s appeals chief, Steven Wu, adding that it was “important only to show that the purpose for the falsifying business records here was to conceal that conspiracy.”

Judges drill down on question about White House conversations

The appeal also concerns whether jurors should have been allowed to hear testimony about supposed White House workflow and conversations — some with then-Communications Director Hope Hicks — and even Trump social media posts during his first term. His lawyers cite presidential immunity for official acts, and they argue his official conduct included responding to the Daniels drama once it became public in 2018.

“Ms. Hicks was serving as a White House official,” talking with the president about how to respond to press inquiries that implicitly concerned his fitness for office, Giuffra told the appeals judges.

Wu countered later: “In this conversation, they were not speaking about a press response. … The president was talking to her about his private opinion.”

The appeals judges pressed both sides about the matter and the specifics of Hicks’ testimony. She told jurors that she asked Trump how he wanted to respond, but as for what he said, she testified only that he expressed relief that the Daniels story hadn’t emerged during the campaign.

Bragg’s office contends that all the White House-related evidence was fair game. The conversations were “unofficial conduct,” some of the other evidence was public record, and some was a general description of office practices, prosecutors say. They maintain that even if some of the evidence should have been excluded, its admission was a “harmless error” that doesn’t warrant overturning a conviction that rested on “a mountain” of other proof against Trump.

Justice Bahaati E. Pitt-Burke wondered aloud about that.

“If you take all of those things cumulatively, right, and there’s a problem with this evidence, there’s a problem with this evidence, at what point … does it stop being harmless error and turn into something else?” she asked.

“It would have to be a lot more than there was in this case,” Wu responded.

Trump’s lawyers also have argued the case was political

While the appeal turns on complex legal disputes, political overtones aren’t hard to find. The very first paragraph of one of the Trump team’s court filings contended that the case was the flimsy product of “immense political pressure” on a Democratic prosecutor to go after Trump — rhetoric that echoes the Republican president’s own oft-repeated claims in the court of public opinion.

The May 2024 verdict made Trump the first former — and now current — U.S. president with a criminal conviction. Though historic, it didn’t impede his return to the White House or subject him to any punishment.

The trial involved $130,000 that Daniels got from Trump’s then-fixer and lawyer, Michael Cohen, weeks before the 2016 election. The money bought, for a time, her silence about an alleged sexual encounter with the married Trump a decade earlier. He says that nothing sexual happened between them.

Trump’s company reimbursed Cohen in 2017, logging those payments as legal expenses.

Trump’s lawyers argue there’s only “weak” evidence that he even knew about Cohen’s dealings at the time. His trial attorneys also said that payments to Cohen were indeed legal expenses, and that any hush money expended on Trump’s behalf wasn’t hidden campaign spending, just an effort to avoid embarrassing his family.

The distinction matters because, under New York law, falsifying business records isn’t a felony unless it’s done with an intent to commit or conceal a separate crime.

While pursuing his state appeal, Trump also has been trying to shift the case to federal court and have it dismissed on immunity grounds. A federal judge said no — for the third time — in August. Trump’s attorneys are appealing that decision, with arguments set for Nov. 16.

Peltz and Sisak write for the Associated Press.

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US weighs new Iran strikes as Vance reaches out: Is war or a deal closer? | US-Israel war on Iran News

Over the past week, Washington and Tehran have sent mixed signals about whether their eight-month war is heading back to full-scale strikes or towards a peace deal.

On Thursday, the head of United States Central Command (CENTCOM), Admiral Brad Cooper, briefed US President Donald Trump on options for renewed attacks on Iran, The Wall Street Journal (WSJ) reported.

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The US and Israel have drawn up joint plans to attack Iran after the November 3 US midterm elections, The New York Times (NYT) reported last week.

Yet on the same day, The Washington Post reported that Vice President JD Vance had offered to meet Mohsen Rezaei, the secretary of Iran’s Supreme National Security Council, in person to negotiate an end to the war.

On Friday, Qatari mediators returned to Tehran for talks coordinated with the US, an official told Reuters.

So is Washington heading back to war, or towards a deal? Here’s what we know:

Why are there conflicting reports?

Essentially, Washington is preparing for war while keeping a diplomatic channel open.

The WSJ reported that the US has boosted air defences and munitions in the region and moved some troops away from bases vulnerable to Iranian retaliation.

Ten US military cargo planes landed at the Ovda and Nevatim air bases in Israel’s Negev region on Thursday, with more sent to Jordan, Saudi Arabia and Qatar, the Israeli public broadcaster Kan reported.

Democratic Senator Chris Murphy, who said he had been briefed on the plans, called them “insane” and warned of a devastating escalation.

US Senator Chris Murphy (D-CT) speaks with reporters on the way to a vote on the "Stop Insider Trading Act" on Capitol Hill in Washington, D.C., US, September 30, 2026. REUTERS/Kylie Cooper
Senator Chris Murphy in Washington, DC, United States [File: Kylie Cooper/Reuters]

Can diplomatic efforts hold off a return to strikes?

Diplomacy has not stopped.

Vance’s letter, delivered to Rezaei through Qatari mediators on Sunday, proposed direct talks led by Vance, with Iran’s nuclear programme on the table from the start, according to the NYT, in a bid to prevent a renewal of strikes.

Whether it might have any influence over what happens next is a matter for debate. Rouzbeh Parsi, an Iran analyst who is an affiliated researcher at Lund University’s Department of History and Human Rights Studies in Sweden, described Vance as the “voice of reason” on Iran within the Trump administration, saying his signals have been “the least volatile and unpredictable”.

But he also told Al Jazeera that Vance’s position has “never proven to be sturdy enough to actually sway Trump”.

“Thus, while the optics with Vance look better than anyone else in the Trump administration, I doubt that they [Iranian officials] give the outreach much credence until Vance proves able to actually deliver something on his own,” he said.

Furthermore, Nader Hashemi, a professor of Middle East politics at Georgetown University, told Al Jazeera that “Rezaei is just one voice among many” adding that the “reality is that decisions are made collectively inside the Islamic republic”.

Wolfgang Pusztai, a security and defence analyst and Austria’s former defence attache to Libya, has a different view, however, telling Al Jazeera, “There is no doubt that the IRGC [Islamic Revolutionary Guard Corps] currently calls the shots in Iran.”

In February, Iran’s then supreme leader, Ayatollah Ali Khamenei, was killed in the initial attacks by Israel and the United States, and his son became the new supreme leader, but Pusztai says he “simply does not have the influence his father did”.

“Without the IRGC’s approval, there will be no agreement with Iran,” Pusztai said, adding it is safe to assume that when Rezaei makes a statement or endorses a proposal, “it reflects the position of the IRGC leadership” and that the US was “absolutely right to negotiate with him”.

Pusztai said it is unclear whether Rezaei is indeed ready to make a serious compromise, but under sustained US pressure, Rezaei, who holds a doctorate in economics, could come to see that “Iran’s interests and the regime’s survival can be better secured without nuclear weapons and through a less aggressive foreign policy”.

“He certainly knows that peak oil is approaching and that time is running out for Iran’s economic recovery through the use of its oil revenues,” he said.

Parliament Speaker Mohammad Bagher Ghalibaf said progress depends on Iran’s seven conditions being met – including the lifting of sanctions, ending the US naval blockade of Iranian ports, guarantees to an end to US-Israeli strikes, and the unfreezing of Iranian assets – adding that the “carrot-and-stick approach has no effect on Iran”, according to the semi-official Tasnim news agency.

Vance, meanwhile, told Fox News on Thursday that Trump would “never” let the conflict become “a forever war”.

This handout picture provided by the Iranian presidency shows Iran's President Masoud Pezeshkian during his meeting with Saudi Arabia's Defence Minister, Pakistan's army chief, and Turkey's intelligence chief in Tehran on October 26, 2026.
Iran’s President Masoud Pezeshkian in Tehran [File: AFP]

Which of all these signals matter most?

The diplomacy may say more than the threats.

Andreas Krieg, an associate professor of security studies at King’s College London, told Al Jazeera that Vance’s offer of direct talks “suggests that the Americans do have second thoughts” and that they are less ready to strike than they publicly suggest.

But he warned that Cooper, whom he called “quite hawkish”, could give Trump false confidence “that there is a military way out of it, when in reality there isn’t a military way out of it”.

“This idea that there is a short and crisp military operation to solve this issue is obviously an illusion,” he said.

Paul Musgrave, an associate professor of government at Georgetown University in Qatar, told Al Jazeera the White House could be sending signals to coerce Tehran, but that “the better interpretation is the simplest one”.

He believes “the United States is getting ready to carry out substantial attacks relatively soon”. He said he does not expect Washington to accept what he called the unfavourable deal Tehran is offering “without another round of attacks”.

Pusztai said Trump’s main focus is now the midterms, making it “very unlikely that he will order another large-scale attack on Iran before the elections”.

“Starting in mid to late November, there could be a major wave of attacks aimed at advancing the American agenda,” he said, adding that the aim would be to weaken the IRGC enough to push it towards a deal on US terms.

Whatever the vote’s result, “in the short term it will not change much”, Musgrave said.

A strong Republican showing could encourage more aggressive tactics, while a Democratic win could push Trump to show his unilateral powers, including by attacking, he said.

A woman holding a picture of children reacts during the funeral of the victims following a reported strike on a school, amid the U.S.-Israeli conflict with Iran, in Minab, Iran, March 3, 2026. Amirhossein Khorgooei/ISNA/WANA (West Asia News Agency) via REUTERS ATTENTION EDITORS - THIS PICTURE WAS PROVIDED BY A THIRD PARTY. TPX IMAGES OF THE DAY REFILE – REMOVING ATTRIBUTION TO STRIKE
A funeral for the bombing victims of Minab School in Iran, which killed 120 children during the first day of the United States-Israel war on the country [File: Amirhossein Khorgooei/ISNA/WANA via Reuters]

Hasn’t this all happened before?

It has. Iran was attacked by Israel or the US while talks were under way in both 2025 and 2026.

“We’ve seen this pattern of behaviour before from the United States,” Hashemi said, describing it as “talking diplomacy while preparing for war”.

On June 13, 2025, Israel launched major strikes on Iranian nuclear and military sites, two days before a sixth round of US-Iran talks was due in Oman. The US joined on June 22, bombing Iran’s Natanz, Fordow and Isfahan nuclear sites.

This year, the US and Israel attacked on February 28, two days after talks in Geneva that mediator Oman said had made “significant progress”.

A day before the strikes, Oman’s foreign minister said Iran had agreed to reduce its nuclear stockpiles to “the lowest level possible”.

Iranian President Masoud Pezeshkian told Al Jazeera in September that Iran no longer trusts negotiations with Washington because attacks had come during previous rounds of talks.

Hashemi said he suspects “the same pattern is repeating itself”, with the US preparing “a massive bombing campaign in Iran, replete with war crimes like we haven’t seen before”, citing his reading of Murphy’s comments.

An explosion caused by a projectile impact after Iran launched missiles into Israel following Israel and the U.S. launched strikes on Iran, in Tel Aviv, Israel, February 28, 2026. REUTERS/Gideon Markowicz ISRAEL OUT. NO COMMERCIAL OR EDITORIAL SALES IN ISRAEL
An explosion in Tel Aviv after Iran launched missiles into Israel, following the Israeli-US attacks on Iran, on February 28, 2026 [Gideon Markowicz/Reuters]

What is blocking a deal?

“The issue is mostly around sequencing and the lack of trust on the Iranian side that the Americans will actually follow through with their commitments,” Krieg said.

Tehran wants sanctions and the US naval blockade lifted quickly, fearing that a slow process gives Trump room to backtrack, he said.

Some IRGC hardliners do not necessarily see war as a bad thing if it tightens their grip on the Hormuz strait, he added, and “the Iranians have been prepping for this war for the last three weeks, so they are ready to fight”.

Krieg said he expects “nothing is going to happen until the 3rd of November [the date of the US midterm elections]”. After that, he said, the likelihood of war will “increase exponentially”.

Any new escalation would be worse than in February and March, he said, with Iran readier to strike critical infrastructure in Gulf countries.

He said the threat to the Gulf “will be unprecedented”.

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L.A. judge weighs feds’ request to block 20,000 California votes

A federal judge on Tuesday seemed skeptical of a Trump administration request to immediately block California officials from counting about 20,000 ballots from voters whose citizenship the administration questions, but said he would not issue a ruling until Wednesday.

U.S. District Judge David O. Carter questioned how the administration had derived its list of suspect voters, worried about disenfranchising eligible voters, said the demands would represent a “monumental change” to California elections and suggested federal prosecutors bringing the case had other means of holding illegal voters accountable.

But just one day after a federal appeals court rejected the same request, Carter said at the conclusion of a 3½-hour hearing in Los Angeles that he needed more time to rule — except on one related issue.

“This court believes it would be wise — that it would be wise — that any threats to state and county elected employees cease immediately,” he said — a clear reference to federal authorities threatening elections officials with criminal penalties if they count any of the flagged ballots.

After the hearing, First Assistant U.S. Atty. Bill Essayli, the top federal prosecutor in Los Angeles who argued on behalf of the Trump administration, said he had made it “abundantly clear that American voters are being disenfranchised in real time,” and that the administration will wait to see what Carter says Wednesday but was likely to appeal the matter back up to the appellate court.

He also denied threatening state officials, despite the Justice Department having sent formal letters to election officials statewide last week warning them of criminal punishments, and Essayli reiterated that position Tuesday.

Carter’s hearing came after Monday’s decision from the U.S. 9th Circuit Court of Appeals — the reverse of what’s normal — because Justice Department attorneys had tried to go over Carter’s head after he didn’t acquiesce to a deadline they’d set for him to rule on their request for a temporary restraining order against the state last week.

However, when the three-judge appellate panel — composed of two appointees of President Trump and one of President Biden — ruled 2-1 Monday that it had no jurisdiction to hear the case given Carter hadn’t yet had the chance, the case returned to Carter’s courtroom.

And there, Carter — an appointee of President Clinton — seemed loath to rush to judgment, despite the Trump administration’s claims of urgency. He said the administration’s method for arriving at its list of potential noncitizen voters was unclear and that he would like to develop the record further, including by bringing in an expert for the court.

“What are these systems? What are the algorithms? How was this derived?” he said.

He also seemed unmoved by the Justice Department’s argument that the ballots must be segregated immediately to prevent noncitizen votes from being counted, and more focused on whether noncitizens who illegally vote can be identified and held accountable while avoiding disenfranchising legitimate voters in the process.

For those who do vote illegally, “you’ve got a remedy, for goodness sakes,” he told Essayli. “Go out and indict.”

The Justice Department sued California, Secretary of State Shirley Weber and Los Angeles County Registrar-Recorder/County Clerk Dean Logan on Oct. 15, two days after Acting Deputy Atty. Gen. Trent McCotter gave Weber and Logan 48 hours to set aside the ballots for the 20,000 flagged voters, whom McCotter described as “likely noncitizens.”

During the hearing, Essayli argued on behalf of the Trump administration that its demands on California and L.A. County were not onerous, could be complied with easily and did not call for ballots to go uncounted. Essayli said the federal government was in court “on a very narrow request for an injunction to separate ballots of those suspected of being noncitizens” only until the state can prove their citizenship.

He argued that the “reliability and credibility” of the federal government process for flagging the 20,000 voters is unquestionable — while also telling Carter, “We’re never going to stand here and tell you that everything is 100%.” He said every vote counts, as some elections “are decided by a handful of votes,” and that the federal government is simply asking California not to break existing federal law barring noncitizens from voting.

“We’re not telling California what they have to do. We’re telling them what they can’t do, which is just count these ballots without doing more to ensure whether they’re citizens or not,” Essayli said.

Essayli — who has aggressively sparred with California officials on social media for weeks — also argued to the court that the federal government has maintained a collaborative “tone” since first asking the state to segregate the ballots, and that he was surprised at how “adversarial” state elections officials have been on the issue.

Attorneys for Weber and the state said the Trump administration’s demand on the state “distorts several legal doctrines beyond recognition” and is clearly illegal, particularly during an ongoing election. They said the administration has provided no evidence that the 20,000 voters aren’t citizens, and has used “data and methods known to be unreliable.”

Michael Cohen, a deputy attorney general for the state, said the Trump administration questions California law that allows voters to attest to their citizenship under penalty of perjury, while ignoring the fact that standard was set not by the state but by Congress.

Anne Bellows, another deputy attorney general, said California has an established framework for running elections, and the Trump administration is trying to “sweep it off the table and replace it with a new, unclear procedure in which the federal government can issue a list and require California to change the way a subset of its voters’ ballots are received, and whether or not they are tabulated,” which she said was illegal and a “recipe for disenfranchisement” of thousands of legitimate voters.

“The stakes here are enormous,” she said.

Attorneys for Logan said the Trump administration has made its demands “without any credible argument” as to how it is legal, that the “proposed remedy” it is demanding from the state is “vague and unworkable,” and that if it wants to question California’s existing processes, “the proper audience for that argument” is Congress — not the federal court.

Several attorneys for voting and civil rights groups also argued against the Trump administration during the hearing, including by arguing that its reliance on third-party data sets — including from Lexis Nexis — was not a trustworthy way of identifying whether voters are citizens.

The litigation is just one part of a much wider battle by the Trump administration to intervene in state-run elections nationwide, and particularly in California, including on the notion that state elections have insufficient guardrails to prevent noncitizens from voting. Elections experts say such fraud occurs, but is exceedingly rare.

While the 9th Circuit panel’s unsigned ruling Monday rejected the Trump administration’s appeal for lack of jurisdiction, both judges in the majority — Mark J. Bennett, a Trump appointee, and Gabriel P. Sanchez, the Biden appointee — wrote independently to make clear that they would have rejected the case on its merits too.

They said it ran afoul of federal law barring interventions in voting in the immediate lead-up to elections, and the U.S. Constitution, which reserves control of elections for the states and oversight for Congress, not the executive branch.

Judge Patrick J. Bumatay, the other Trump appointee on the panel, also wrote independently in dissent — arguing the federal government must “have the power to stop this potential attack on the integrity of our elections.”

Carter previously rejected an administration lawsuit demanding California’s unredacted voter rolls as “unprecedented and illegal” — a decision similar to those made by dozens of other federal judges in other states. Federal prosecutors recently charged 28 lawful permanent residents in California with election-related crimes, including illegally registering to vote. Some of those charged expressed confusion, said they had no recollection of registering or had never voted.

There are more than 23 million registered voters in California.

Last week, Justice Department officials sent letters to election officials in counties across California demanding they sequester any flagged ballots in their jurisdictions, and warning them that they could face criminal penalties if they don’t. State officials denounced the letters as a legally baseless intimidation tactic.

Federal judges also have slapped back executive orders in which President Trump demanded new nationwide voter ID and citizenship requirements, and blocked a Trump administration plan to empower the U.S. Postal Service to vet mail ballots for the first time.

Beyond the courts, Democrats and voting rights groups have been strategizing for months on how to prevent the Trump administration from interfering in the midterm elections, which will determine control of Congress. The Trump administration has said it is merely trying to enforce the law and ensure that noncitizens do not illegally vote and negate the ballots of U.S. citizen voters.

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