NEW YORK (AP) — Three of the nation's biggest banks — JPMorgan Chase, Bank of America and Wells Fargo — are benefiting from growing deposits, fewer bad loans and higher investment banking fees.
But not everything is rosy as the banks report earnings this week. Revenue remains weak and some of the banks' earnings have come from one-time accounting moves. There are also ongoing legal expenses related to mortgage securities and other kinds of lawsuits.
Among the trends in fourth-quarter bank earnings:
REFINANCING BOOM WANES: Interest rates are rising, and fewer Americans are getting mortgages or refinancing their homes. All three banks reported double-digit declines in their mortgage business for the fourth quarter. All expect a further slowdown in mortgage originations this year.
Mortgage rates are tied to the bond market, where yields have risen steadily since May 2013. Mortgage giant Freddie Mac said last week that the average 30-year fixed rate mortgage had an interest rate of 4.51 percent, compared with 3.35 percent in May 2013.
"It's no surprise that the banks' mortgage businesses have slowed," says Michael Scanlon, a managing director at John Hancock Asset Management.
The slowing has led to thousands of layoffs at the banks.
LOAN PROVISION BOOST: A large chunk of fourth-quarter earnings at JPMorgan, Bank of America and Wells Fargo came from an accounting maneuver related to loan-loss reserves.
Because of the way bank accounting works, money pulled from loan-loss reserves can be used to increase profits.
Here's the backstory. During the financial crisis, as tens of thousands of Americans fell behind on their mortgages, banks started putting lots of money into reserves to cover potentially bad loans. At the height of the crisis, the big banks had socked away tens of billions of dollars into loan-loss accounts.