Banks reported a rise in trading income as heightened volatility amid the U.S. Presidential elections led to a significant rise in client activity. Also, mortgage banking fees recorded an impressive growth. But investment banking fees have not shown any improvement so far.

Further, the improving economy spurred demand for loans, leading to an increase in interest income. Moreover, as energy sector concerns eased, provision for credit losses witnessed a decline. Also, operating expenses recorded a downward trend on the back of continued cost saving initiatives.

Nonetheless, the reaction of bank stocks has not been in line with the results. This perhaps reflects investors’ discontent with the outlook provided by the banks.

Important Earnings of the Week

1. Driven by impressive trading revenues, JPMorgan Chase & Co.'s (JPM) fourth-quarter 2016 earnings of $1.71 per share easily surpassed the Zacks Consensus Estimate of $1.42. Also, a modest rise in mortgage banking fees and investment banking income drove the results. Further, higher net interest income, perhaps attributable to the rise in loan, supported the top line. (Read more)

2. Rise in trading revenues as well as mortgage banking fees drove Bank of America Corporation's (BAC) fourth-quarter 2016 earnings of 40 cents per share, which surpassed the Zacks Consensus Estimate of 38 cents. Also, provision for credit losses recorded a fall as the energy sector concerns seem to be over. However, as expected, investment banking fees declined due to lower advisory fees and equity underwriting fees. (Read more)

3. Driven by interest income, Wells Fargo & Company’s (WFC) fourth-quarter 2016 adjusted earnings of $1.03 per share outpaced the Zacks Consensus Estimate by 3 cents. The company witnessed organic growth aided by strong loans and deposit balances, along with elevated interest income. However, higher expenses and lower non-interest income were a concern. (Read more)

4. Citigroup Inc.’s (C) fourth-quarter 2016 earnings from continuing operations of $1.14 per share outpaced the Zacks Consensus Estimate of $1.12, driven by a decline in operating expenses. Improved trading income and lower cost of credit supported the results. (Read more) 

5. U.S. Bancorp’s (USB) fourth-quarter 2016 earnings per share of 82 cents came a penny above the Zacks Consensus Estimate. Results were driven by growth in net interest income and non-interest income. However, a rise in expenses and higher credit costs were on the downside. (Read more)

6. A notable rise in the top line drove BB&T Corporation’s (BBT) fourth-quarter 2016 adjusted earnings of 73 cents per share. This was in line with the Zacks Consensus Estimate. An improved net interest income and non-interest income as well as stable provisions supported the results. However, higher operating expenses remained a headwind. (Read more)

Price Performance

Here is how the seven major stocks performed: In the last four trading sessions, Citigroup and JPMorgan were the major losers, with their shares falling 5% and 3.9%, respectively. Also, The PNC Financial Services Group, Inc.’s (PNC - Free Report) shares declined 2.7%.

BofA and PNC Financial were the best performers in the last six months, with their shares surging 58% and 40.4%, respectively. Moreover, JPMorgan’s shares jumped 30.4%.

What’s Next?

Over the next five trading days, Q4 earnings for banks will continue at full throttle. Among the major banks reporting are Capital One Financial Corporation (COF - Free Report) and Fifth Third Bancorp (FITB - Free Report) . Both the companies are coming out with their results on Jan 24. Price performance of banking stocks will largely depend on the upcoming results and management guidance.