Don’t expect sparkling 4Q bank profits

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Bill Radke: JP Morgan will release its quarterly profits today and other banks will report next week. Marketplace’s Jeremy Hobson says analysts are not expecting a pretty picture.

Jeremy Hobson: Following the government bailout, the big investment banks have done pretty well. Profiting from a skyrocketing stock market and a wild ride in fixed-income investments. Things like mortgage-backed securities and bonds.

Jamie Peters: We still had such a volatile fixed-income trading market that the banks were able to take advantage of that and make a lot of fees off of it.

Jamie Peters is a banking analyst at Morningstar. She says toward the end of ’09, the volatility died down, and many investors took their winnings and walked away from the market. That, she says, put a big dent in the bottom lines at Goldman Sachs, JP Morgan and Morgan Stanley. Though not enough to force them into another government rescue.

Peters” We are talking about a return to normality. The banks were expecting this, they realized they were making excess returns.

Also impacting bank balance sheets in the fourth quarter, she says — more loan defaults and the repayment of TARP money.

In New York, I’m Jeremy Hobson for Marketplace.