Stronger lending to consumers and small businesses emerged as a bright spot in bank earnings this week, even as the oil market downturn stood out as an emerging risk.
Results from JPMorgan Chase, Bank of America and Wells Fargo showed lending to be particularly strong in areas like credit cards, auto loans and home mortgages, as large banks strive to make up for the drag from low interest rates by increasing loans to consumers.
At Wells Fargo, the nation's largest mortgage lender, a 6.5 percent gain in community earnings to $3.7 billion compensated for an 8.1 percent drop in wholesale banking to $1.7 billion.
That trend is a welcome antidote to the slow-growth economy that has banks planning for a "lower-for-longer" baseline scenario for US interest rates.
The economy is "getting better, but only incrementally better," said Wells Fargo chief executive John Stumpf.
Stumpf sees more muted activity ahead, with US growth at just 2.4-2.5 percent in 2016.
"The biggest risk to the US economy is what's happening in the rest of the world," he said.
JPMorgan Chase also reported higher net income in consumer and community banking behind increased mortgage banking profits. The biggest US bank by assets suffered drops in other businesses, including corporate and investment banking and commercial banking.
Consumer banking was also a standout division at Bank of America, which cited year-over-year increased activity in deposits, mortgage originations, credit card issuance and brokerage assets.
"On Main Street there is a little bit more momentum than you might see in the overall economy," said Marty Mosby, a bank analyst at broker/dealer Vining Sparks.
Small businesses and households "are starting to get some traction, which they haven't had so far in this recovery, whereas the corporate sector is the one where we are seeing a little bit less momentum," he said.
Mosby said businesses had halted big investment plans as worries about a potential Greek debt default in the spring morphed into summer concerns about China's slowing economy and market turmoil, and then to the risk of a US government shutdown before year-end due to budget strife on Capitol Hill.
"That uncertainty causes businesses to say, 'Let's wait and let the landscape calm down'" before making investments, Mosby said.
- Oil defaults ahead? -
Large banks have also lifted their reserves in case of energy industry defaults.
Wells Fargo's wholesale profits were dented by such an increase because the company believes the energy industry "will incur greater challenges in the near term as it adjusts to lower commodity prices," said chief financial officer John Shrewsberry.
Bank of America also lifted its reserves for oil-related loans after placing additional loans on the watch list for potential default.
BofA chief executive Brian Moynihan said the company's oil exposure was "manageable" because much of the bank's work has been to package loans where "the risk is distributed out to investors."
Citigroup also lifted its reserves for institutional clients by $275 million, although chief financial officer John Gerspach said the bank feels "very good" about its overall exposure.