Most obvious will be the pall cast by this week's national settlement over foreclosure abuse. Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and six other banks have agreed to pay a combined $8.5 billion to settle the government's accusations that they wrongfully foreclosed on millions of struggling homeowners.
The banks have already said the settlement will crimp their fourth-quarter results. Bank of America expects a hit of $2.5 billion - more than it made in the fourth quarter of 2011, when it earned about $1.6 billion.
Longer term, the settlement is the latest reminder that a legacy of risky mortgage lending, which helped set off the 2008 global financial crisis, is still exacting consequences in the form of quarterly charges, lawsuits and regulatory fines. The financial crisis may no longer be a sharp pain, but its aftermath is a nagging ache.
The foreclosure mess is hardly the only legal or regulatory maelstrom banks are dealing with. In the fourth quarter, the government separately sued Wells Fargo, JPMorgan and Bank of America, among others, over mortgages they or companies they later bought made in the years before the crisis. The banks have disputed the allegations.
Also, Citigroup had to dismiss a high-profile analyst after regulators accused him of breaking disclosure rules about a company he was covering. A British bank, HSBC, settled Justice Department accusations that lax oversight allowed money launderers to shift funds around with impunity.
Some investors are wondering if U.S. banks could become ensnared in a scandal over the manipulation of a key interest rate. Over the summer the British bank Barclays was fined $453 million by U.S. and British regulators for trying to manipulate the rate, which is known as Libor, or the London Interbank Offered Rate.
Both Citigroup and JPMorgan have said in regulatory filings that financial regulators and state attorneys general had asked them for information related to their role in setting the interest rate, which is a global benchmark for many kinds of loans and short-term borrowing. They and Bank of America, along with other banks, are the subject of Libor-related lawsuits filed by pension funds and other investors.
Banks are already operating in a challenging business environment. Low interest rates are crimping what the banks can earn when they make loans. Increased regulation has cut into some of their former sources of profit, like trading for their own account. Feeble economic growth has made many small businesses and individuals nervous about borrowing money.
And even though 2012 was a good year for bank stocks, that was in large part because 2011 was so bad. Financials were the best performing stocks in the Standard & Poor's 500 index in 2012. In 2011, they were the worst.
To be sure, analysts predict that earnings at most of the big banks could increase for the fourth quarter. Much of that could come not from higher revenue or lending but from cutting jobs and other expenses, and from trimming reserves they hold for loans that might go bad.
Thomas Curry, head of the Office of the Comptroller of the Currency, a government agency that regulates banks, warned recently that banks shouldn't deplete their capital cushions just to boost quarterly earnings.
"I remain very concerned that too many institutions are continuing to reduce provisions (for potentially bad loans) solely to boost earnings," Curry said in a speech in October. "... We are ready to take action if and when it is needed."
Here's a rundown of when major banks will report financial results for the final quarter of 2012:
-WELLS FARGO: Reports Friday. Mortgage refinancing drove third-quarter results at both Wells Fargo, the country's biggest mortgage lender, and JPMorgan Chase, the second-biggest. Analysts will want to know how long the wave can last.
-JPMORGAN CHASE: Reports Wednesday, Jan. 16. JPMorgan's surprise $6 billion trading loss last year has made it a target for investigators. In a regulatory filing in November, JPMorgan said it is under "heightened regulatory scrutiny" and expects that it "will more frequently be the subject of more formal enforcement actions."
-GOLDMAN SACHS: Reports Wednesday, Jan. 16. Analysts will want to know if the "fiscal cliff" budget showdown in Washington made Goldman's clients shy away from trading, or whether they jumped at the chance to make money on the uncertainty.
-BANK OF AMERICA: Reports Thursday, Jan. 17. The bank continues to grapple with the fallout from problem mortgages made before the crisis. On Monday, in addition to the national foreclosure settlement, Bank of America announced it would settle charges with the government-sponsored mortgage lender Fannie Mae over mortgages Fannie bought from Bank of America.
-CITIGROUP: Reports Thursday, Jan. 17. The earnings report will be a critical test for new CEO Michael Corbat, who will be making his first major appearance to Wall Street since taking over the bank in October. He took the top job after Vikram Pandit abruptly stepped down in October. Corbat has already announced job cuts and plans to exit some countries.
-MORGAN STANLEY: Earnings date not announced. The bank is trimming jobs and other expenses, including plans reported this week to cut another 3 percent of its workforce, or 1,600 jobs. Morgan Stanley is also focusing on financial advising as a way to build up revenue more reliably.
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