Jan 10 (Reuters) - Earnings at Bank of America Corp, Citigroup Inc and Wells Fargo & Co this year could receive their biggest boost from the release of money that had been set aside to cover mortgage and card losses, BernsteinResearch said.
Banks are now more comfortable about cutting down their reserves as an improving economy puts U.S. consumers in a better position to pay bills and increase borrowing.
The brokerage said Citigroup and Bank of America had the highest level of excess cash reserves to meet bad loans - about 10 percent of their 2014 earnings per share.
U.S. banks are set to report earnings next week, with JPMorgan reporting on Tuesday.
Household debt payments as a share of disposable income are at the lowest level since the Federal Reserve began tracking them in 1980.
While banks will continue to benefit from declining credit costs, they may choose to release the money from different portfolios, Bernstein added.
"Looking forward, the reserve release story at the large-cap banks looks a lot more tailored and bank specific," analyst John McDonald wrote in a note to clients.
Bernstein has a "market perform" rating on Bank of America and "outperform" on Citigroup and Wells Fargo.
(Reporting by Varun Aggarwal in Bangalore; Editing by Saumyadeb Chakrabarty)