Pay attention to QE3 profits for the banks that will be released next month.
One of the few businesses working well for the biggest banks these days is the same one that got them in trouble just five years ago: mortgages.
Wells Fargo & Co and JPMorgan Chase & Co are both expected to post more than $4.5 billion in profits for the third quarter, an increase of more than 15 percent from last year, according to Thomson Reuters I/B/E/S.
Other businesses at big banks will likely benefit from the mini-mortgage boom. Fixed-income trading revenue will likely rise at Goldman Sachs Group Inc and other investment banks, thanks in part to more trading in mortgage-backed securities.
A booming mortgage business will help make up for a challenging environment that includes low interest rates squeezing lending profits and slow merger activity pressing earnings from investment banking. Analysts said banks may announce new rounds of cost cutting.
While banks are making new mortgages, the home loan business is still tough. Lenders have millions of foreclosures to process, and all the current refinancing will translate into lower income from mortgage securities they choose to hold.