Earnings season for the nation's largest banks begins on Tuesday, with JPMorgan Chase (JPM) leading off, followed by Wells Fargo (WFC), both before the market open.
In the third quarter, JPMorgan Chase posted a surprise net loss of $380 million, or 17 cents a share, driven by $9.15 billion in provisions for litigation reserves. The bank reported $23 billion in legal reserves set aside as of Sept. 30, which more than covers the $17.5 billion in residential mortgage-backed securities settlements the company entered into with government authorities and investors during the fourth quarter. But JPMorgan did say its fourth-quarter after-tax earnings would be lowered by $850 million, as a result of its $2.6 billion settlement with the Department of Justice and regulators over its role in the Bernard Madoff Ponzi Scheme.
Analysts on average expect JPMorgan to post fourth-quarter earnings of $1.35 a share, down slightly from $1.39 a year earlier. JPMorgan's shares were down 1.5% Monday to close at $57.60. Please see What JPMorgan Shareholders Really Care About for more on what to expect from the company.
Wells Fargo continues its strong operating performance, with a return on tangible common equity (ROTCE) of 17.86% for the first three quarters of 2013, according to Thomson Reuters Bank insight. The consensus fourth-quarter EPS estimate for the bank is 98 cents, down a penny from 99 cents during the third quarter, but up from 92 cents a share during the fourth quarter of 2012.
Wells Fargo's shares were down 0.8%, closing at $45.56.
Please see Regional Bank Earnings: What to Expect, for a detailed discussion of several challenges facing major U.S. banks, as wells as opportunities in 2014.
This chart shows the stock performance of State Street, JPMorgan and Wells Fargo against the KBW Bank Index and the S&P 500 since the end of 2011:
data by YCharts
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