As big U.S. banks approach earnings this week, they're taking a page from a familiar playbook: Under-promise and over-deliver.
That's been the strategy since the financial crisis, as low interest rates have crushed margins, consumers continued deleveraging and trading activity bumbled along. A boom in mortgage refinancing in 2012 was billed a surprise, as was one in corporate borrowing in 2013 and 2014—both thanks to the Federal Reserve keeping bond yields near all-time lows.
Without those surprises, bank investors found little to like. Revenues have risen only slightly, and legal costs have skyrocketed. The Department of Justice took in more than $25 billion in 2014 alone, thanks in large part to hefty settlements from Citigroup and Bank of America. In the face of those headwinds, banks have been forced to reach their profit targets by cutting costs and releasing money previously saved to cover bad loans.
Investors may see 2014 earnings—when they begin in earnest Wednesday—carry more of the same demons.