For years after the financial crisis, there was no telling how banks would perform on a quarter-by-quarter basis. This was especially true for banks that ran into trouble in the crisis.
Fortunately, this extreme uncertainty is now a thing of the past.
The majority of Citigroup's issues took place from the end of 2007 through 2010. After generating record earnings in 2005, Citigroup's net income deteriorated rapidly until the bank reported an almost $10 billion net loss in the fourth quarter of 2007.
Over the next three years, thanks to elevated charge-offs and legal expenses, Citigroup's bottom line fluctuated between deep losses and marginal profits. It wasn't until 2012 that the bank's earnings began to stabilize, albeit at a more modest level than they were before the downturn.
Bank of America's story is similar, though the extreme volatility in its earnings came later. Just as Citigroup's fluctuations began to moderate, Bank of America's were picking up steam.
The reason Bank of America's major losses came later is because they traced, in large part, to legal settlements stemming from its 2008 acquisition of Countrywide Financial. You can see the full list here, but to give you a sense of scale, in the first quarter of 2012, Bank of America entered into an $11.8 billion settlement with federal and state regulators over charges of faulty foreclosure-and-servicing practices.
You can see similar patterns in JPMorgan Chase's (NYSE:JPM) earnings, too, though to much less of a degree. The exception among the four biggest banks is Wells Fargo (NYSE:WFC), which, despite a dip during the crisis itself, has seen its earnings increase slowly, but steadily, until lagging in the wake of its recent fake-account scandal.
Fortunately, wide fluctuations in bank earnings are now in the rearview mirror. Bank of America turned the corner earnings-wise in 2015. Citigroup's have also stabilized, as have JPMorgan Chase's. The net result is that, from here on out, any changes in bank earnings from quarter to quarter should be on the margin.
Trading revenues will fluctuate, as they tend to do. Interest rates will also factor into the equation, both in terms of net interest income and securities' values. And loan losses could rear their ugly head, as well, if the economy takes a turn for the worse.
These fluctuations should all be on the margin relative to the extreme volatility bank analysts and investors grew accustomed to over the past decade. This is a good thing.