US Banks: Five learnings from 4Q21 earnings: disappointments get smack down

US banks outperformed in 2021 and in early January 2022 on optimism about higher rates, loan growth acceleration, and ultimately, expanding pre-provision profits. However, the bar was high. In a tough tape, US large banks have mostly underperformed (though with some exceptions).

We detail our five biggest takeaways from the largest US bank reports: 1) a high bar; disappointments were punished; 2) Citigroup is a show me story; it is about execution, not strategy; 3) Wells Fargo is delivering; 4) expense pressure could be mounting; and 5) the battle between rising PPNR and normalizing credit losses begins: banks are over-earning on credit; PPNR minus net charge offs leads to 20-30% lower earnings in 2021.

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