For a spell last year American banks seemed poised to reattain the sort of double-digit returns that have largely eluded them since the financial crisis. A robust market for takeovers and public offerings was producing a flurry of fees. Credit quality, which had collapsed in the crisis, was “pristine”, according to Jamie Dimon, the boss of JPMorgan Chase, America’s biggest bank by assets—something that was allowing banks to reduce the provisions they had made to cover soured loans. The rash of swingeing fines that had been disfiguring profits had largely dissipated (although Goldman Sachs recently agreed to pay $5 billion to settle charges that it knowingly peddled dodgy mortgage-backed securities). And then there was the Federal Reserve’s decision to raise interest rates in December for the first time in nearly a decade, which held out the prospect of a growing margin between the rates banks pay depositors and those they charge borrowers.
Glimmers of that sunnier outlook can still be seen in the big American banks’ annual results. JPMorgan Chase reported a record annual profit on January 14th of $24 billion. Bank of America and Citigroup posted their biggest profits since 2006 (although the return on equity at both is a fraction of what it once was). Yet share prices in the banking sector have fallen by more than 20% since July, with half of the decline coming in the first weeks of 2016.