OREANDA-NEWS. Earnings at large US banks were generally up on a linked-quarter basis during second-quarter 2015 as the industry showed some glimmers of improving net interest margins, says Fitch Ratings. Among the 12 large banks with material loan portfolios included in Fitch's quarterly US bank earnings report, half reported margin expansion. It is unclear whether this marks an inflection point for these banks, but it does reverse a multi-quarter trend of NIM compression due to the low interest-rate environment.

Results were also aided by good fee income and still benign credit costs. Noninterest income benefitted from mortgage banking, wealth management, and investment banking, particularly loan syndication fees for the large regionals.

However, Bank of America, Citi, JPMorgan Chase, Goldman Sachs and Morgan Stanley all reported lower capital market revenues on a linked-quarter basis following the seasonally stronger first-quarter 2015. All, except Morgan Stanley, reported modestly lower capital market revenues from a year ago as well, following a good second-quarter 2014. Much of the sequential decline for all five banks was due to much lower FICC revenues, which fell 30% in aggregate on a linked-quarter basis.

Mortgage results were solid once again in second-quarter 2015 as the spillover in refinancing applications, as well as the seasonally strong spring selling season, led to large increases in mortgage originations.

Although controlling expenses remains a key strategic priority for the banking industry given revenue headwinds, 11 of the 16 banks still reported higher expenses on a linked-quarter basis, partially due to higher production-related expenses. With the exceptions of State Street and Goldman Sachs, legal-related charges did not overwhelm any banks earnings as they had in the past.

While the impact of falling oil prices has yet to result in material loan losses for the large banks, most of the banks reported increases in energy-related problem assets. Fitch expects that when the borrowing base redeterminations are completed in second-half 2015, there will be further deterioration in energy-related problem assets, leading to higher provisioning.