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Capital One: Earnings Season Winner

Stocks in this article: BAC WFC STI COF I:BKX

SunTrust's shares rose 0.5% on Friday to close at $41.43. The company will announce its full third-quarter results on Oct. 17.

JPMorgan Chase's Surprise

The nation's largest bank by assets early on Friday reported a third-quarter net loss of $380 million, or 17 cents a share, declining from earnings of $6.5 billion, or $1.60 a share in the second quarter, and $5.7 billion, or $1.40 a share, during the third quarter of 2012.

Investors knew JPMorgan Chase's earnings would decline, because of the bank's three major regulatory settlements during the third quarter, including an agreement to pay $410 million "in penalties and disgorgement to ratepayers," to settle Federal Energy Trading Commission charges of market manipulation, $920 million in fines to settle multiple probes of the 2012 "London Whale" trading fiasco and another $369 million in fines and customer refunds to settle regulatory charges of " illegal credit card practices."

But investors have been waiting for "the big one," which is expected to be a global settlement of multiple criminal and civil investigations of JPMorgan's mortgage lending and sales activities by the Department of Justice, federal regulators and states' attorneys general. Various media reports have estimated the settlement -- possibly delayed by the partial shutdown of the federal government -- could reach as high as $11 billion.

JPMorgan took a forward approach by setting aside $9.15 billion for litigation reserves during the third quarter, which lopped of $7.20 billion, or $1.85 a share, from after-tax earnings.

The company increased its transparency by reporting its litigation reserves totaled roughly $23 billion as of Sept. 30, with a "range of reasonably possible losses" up to $5.7 billion beyond what is currently reserved. Those are huge figures, but the relatively strong market reaction to the announcement shows that investors are comfortable that further losses will have little effect on JPMorgan's financial performance in 2014. JPMorgan set earnings records over the past three years of $17.4 billion, or $3.96 a share in 2010; $19.0 billion, or $4.48 a share, in 2011; and $21.3 billion, or $5.20 a share, in 2012.

JPMorgan's shares were down a penny to close at $52.51. The shares remain among the cheapest for bank stocks, valued at just 8.8 times the consensus 2014 EPS estimate of $5.99, among analysts polled by Thomson Reuters.

Wells Fargo Continues Record Streak

Wells Fargo is now the nation's most profitable bank, and on Friday posted record earnings of $5.578 billion, or 99 cents a share, for the third quarter. In comparison, the company earned $5.519 billion, or 98 cents a share, in the second quarter, and $4.937 billion, or 88 cents a share, during the third quarter of 2012.

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