The assets of United States banks are comparable to two-thirds of the country's annual gross domestic product. No wonder, then, why so many investors watch the earnings of US financial institutions with such keenness to glean economic signals.
Here's what we're watching for in the spate of universal banks set to announce in the next week.
First out the gate is Wells Fargo, the San Francisco-based bank that's the nation's largest mortgage lender. By the looks of consensus and analyst expectation, Wells might have to take one for the team.
Amid much talk of a big bank stock rally, Wells shares have traded down nearly 1 percent as a flurry of analyst reports have pegged Wells as one of the banks most vulnerable to a slowdown in mortgage refinancing activity and the continued low interest-rate environment. (Read More: Stock Blog: Buy Wells Fargo Now)
Wells: Shrinking NIM, Slowing Growth?
One of the biggest fears is that Wells Fargo sees yet another drop in its once best-in-class net interest margin, or the level of profitability at which a bank can reinvest its deposit. In the third quarter, so-called "NIM" at the San Francisco-based lender dropped by 25 basis points, sending shares down 4 percent. Analysts at Bernstein are forecasting a drop of just one basis point for the fourth quarter, while Morgan Stanley analyst Betsy Graseck has called Wells Fargo a net interest margin "trap."
To spur loan growth, Wells had been buying higher-yielding European assets, though that strategy may have run its course. The third quarter also saw loan growth taper off at Wells Fargo, dropping to 4.63 percent from 4.83 percent the previous quarter. (Read More: Fair Share of Disappointments Ahead as Earnings Season Kicks Off)
JP Morgan: Low Expectations Could Portend Surprise in Capital Markets
While most of the banks on tap to report next week also face industry-wide questions about declining margins and growth, they will also face additional scrutiny on capital markets and expenses.
The good news for JPMorgan Chase is that low expectations are easier to beat. With the quarter already seeing slow business in the wake of Hurricane Sandy and in the face of the fiscal cliff, former CFO Doug Braunstein estimated capital markets activity would be down as much as 20 percent. Instead, the late rush to raise debt amid low interest rates has been an unlikely surprise. (Read More: The Key to Earnings Season? Banks)
According to Dealogic, global investment banking revenues were down 3 percent in 2012. While loan syndication and equity issuance dropped sharply, bond issuance skyrocketed — up 30 percent from the prior (also, record) year, and comprising the biggest share of investment-banking revenues in 15 years.
That portend good news for JPMorgan, which holds the top spot in global debt deals.
Bank of America: Another Quarter Wiped Out?
Bank of America said it expects to post a modest profit for the fourth quarter, despite being loaded with pre-tax charges from long-running mortgage settlements. (Read More: Wall Street Mixed on BofA Settlements)
All in, the bank will use as much as $5.2 billion that it hadn't previously reserved to cover these costs, which include a $1.1 billion cash payment for robo-signing, and a $2.7 billion cash payment as part of a separate settlement with Fannie Mae.
Investors aren't getting their hopes up, after the third quarter saw charges from a similar settlement knock its earnings per share to zero.
CEO Brian Moynihan has said that a "recurring revenue stream" — ie, a predictable one — will be needed before returning more capital to shareholders.
Citigroup: Starting Fresh
For Citigroup, the fourth quarter will be the first for newly minted CEO Michael Corbat. In a big first move in December, he axed 11,000 jobs, a strategy that will result in a billion-dollar charge in Q4.
—By CNBC's Kayla Tausche; Follow her on Twitter: