NEW YORK (TheStreet) -- The vacation is over for bank stock investors, with January promising to be a busy month.
Here are five things to watch:
1. Earnings season kicks off next week, with JPMorgan Chase (JPM - Get Report) and Wells Fargo (WFC) reporting fourth quarter results on Jan. 14, followed by Bank of America (BAC - Get Report) and Citigroup (C) later in the week.
The fourth quarter is expected to be ho-hum for banks, with a modest rise in loan growth, weaker fixed income trading revenues, strong investment banking fees, declining mortgage banking revenues and continuing improvements in credit.
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The impact of the Volcker rule would probably be the focus of conference calls for the larger, universal banks. The outlook for legal costs and efforts to reduce expenses will also be discussed.
2. Outside of earnings, investors can expect a "blizzard of political activity" in January, according to KBW analysts Brian Gardner and Michael Michaud. These events could shape the regulatory and political environment for banks in the coming year.
Starting on Monday, the Senate will vote on Janet Yellen's confirmation as chair of the Federal Reserve. That is expected to be an easy confirmation.
The analysts also note that there will be several personnel moves at the Fed this month. Later this month, the Senate is expected to confirm Stanley Fischer as vice chair of the Fed, succeeding Yellen. The White House may also announce nominations to fill two vacant seats on the Fed's board this month.
Watt's appointment is expected to usher in several changes on the housing policy front. Unlike current acting director Edward DeMarco, Watt is expected to be less focused on shrinking the agencies' dominance in the market and is likely to do more to support the mortgage industry.
He has already said he would delay a recent proposal by DeMarco to raise guarantee fees charged on mortgages sold to Fannie and Freddie by 11 basis points. The proposal aimed at making such loans more expensive so as to draw in competition from private capital. However, many feared that the move was too soon for the fragile mortgage market.
Watt is expected to review and slow other initiatives at the FHFA in an effort to support the market, according to analysts.
4. The Consumer Financial Protection Bureau's ability-to-repay/qualified mortgage (QM) rule takes effect on Jan. 10. Lenders will be prohibited from extending mortgages to borrowers who cannot reasonably be expected to repay a mortgage.
Abusive lending practices that were widely prevalent in the boom days such as negative amortization loans and mortgages with a term greater than 30 years would be effectively banned.
Banks will instead receive greater protection if they make so-called qualified mortgages, which, among other things, limit the amount of debt a borrower can assume to 43% of his income.
Still, while there have been fears that the new rules would severely curtail credit -- by some estimates, about half of the mortgage market could be eliminated in the long run -- the impact of these rules in the near term is relatively benign.
For one, mortgage credit conditions are already so tight that the new rules might not have much more of an adverse effect. On the contrary, certainty about the rules might allow lenders to take on some risk and loosen credit.
Still, the KBW analysts expect "lenders will be particularly cautious to non-QM borrowers especially in first half of the year as lenders adapt to the new rules."
5. On Jan. 15, banking regulators will clarify how the Volcker rule applies to collateralized debt obligations backed by Trust Preferred securities. The Volcker rule seeks to prevent banks from taking excessive risk with their capital even as they get low-cost deposits guaranteed by the Federal Deposit Insurance Corporation.
One provision of the rule prevents banks from investing in "covered funds", which includes CDOs backed by Trust Preferred Securities.
Banks have until July 2015 to sell these securities. But community banks have said that is insufficient amount of time and some have said they would have to take significant fourth quarter losses as they write down those securities.
The American Bankers Association and a group of community banks have filed a lawsuit against regulators regarding the rule.
-- Written by Shanthi Bharatwaj in New York