U.S. Banking Quarterly Review: 3Q14 (Fighting Against the Current of Low Interest Rates)

...Net Income Generally Higher: Reported net income for the largest 17 U.S. banks included in this report generally improved during the quarter on a sequential basis and from a year ago supported by modest spread income growth, a keen focus on core expenses, improved capital markets results and various one-time gains related to loan sales or divestitures. This was offset by elevated litigation- and compliance-related charges, higher provision expenses for some and the drag of the low interest rate environment on margins. These challenges, combined with higher capital requirements, are contributing to downward pressure on returns on equity, with the average ROE now at roughly 10% (excluding BAC) for the 17 banks discussed in this report, trailing the presumed cost of equity of between 10% and 12% and well below pre-crisis levels of approximately 16% in 2005. Capital Markets Turnaround, Legal Charges Persist: Core results for the top six U.S. banks included in the table below were generally...

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