By David Henry

NEW YORK, (Reuters) – Analysts believe that big U.S. banks will see an increase in core revenue for the fourth quarter thanks to new lending and firming Treasury yields. However headline earnings may be mixed due to differences in how each institution accounted pandemic loan loss losses.

On Friday, JPMorgan Chase & Co (NYSE:) and Citigroup Refinitiv’s Friday analyst estimates show that Inc and Bank of America Corp will post declines of roughly 20% to 30% in profit compared to the previous year. Bank of America Corp, however, is expected to report a 20% increase in its profits when it reports Jan. 19.

Wells Fargo (NYSE:) & Co, which also reports on Friday, is expected to show a 67% jump in profits.

The difference in the pace that banks have started to reverse accounting charges related to pandemic-related loans losses, which has yet not occurred, will play a large part in this mixed performance. Restructuring costs at Citigroup, Wells Fargo and the sale of assets are other factors that can complicate matters.

Goldman Sachs Group Inc (NYSE: Morgan Stanley The company (NYSE:) is expected to post fourth quarter profit drops of approximately 7% and 22% respectively as fixed income trading income revenue declined from extraordinary levels.

However, overall, it is positive. Analysts expect that bank executives will be optimistic about the outlook for core earnings.

As the economy continues to recover, loan growth is expected to continue, and yields from the banks’ Treasury securities increased, or at most held steady during the quarter, operating profits will rise.

Dick Bove, an analyst at Odeon Capital Group wrote that investors should look beneath the surface to see much of what is possible.

Richard Ramsden, a Goldman Sachs analyst, estimated that core profits will rise by about 6% after removing loan loss provisions and taxes.

Analysts reported that more consumers and companies returned to banks for credit in the fourth quarter, after having been supported by stimulus funds from government last year.

The fourth quarter saw a 4% increase in core bank loan balances, which was the fastest growth for nearly two years according to the estimates of Deutsche Bank Matt O’Connor is a DE: analyst, and this analysis was based upon Fed data as of Dec. 22. In a note, O’Connor explained that the strength of this report was due to business and consumer credit cards.

Gerard Cassidy, RBC Capital Markets, said that the quarter offered an insight into what higher net interest income could look like as Treasury yields rise 2022.

The yield curve is a measure of the difference between the average daily yields on shorter-term and longer-term government securities. It was slightly higher during this quarter.

Investors bet against these positive trends to push the KBW Bank Index higher by 35% in 2021. It easily beat the 27% gain.

O’Connor stated that a slow pick-up of loan growth in the 4Q and a recent increase in interest rates bode very well for bank guidance for net interest income for 1Q22 as well as for full year.

Some investors remain cautious about buying additional bank stocks because of the uncertain economic outlook due to inflation.

There are increasing doubts about whether the Fed can maintain lending growth’s recovery. Minutes from the Fed’s latest policy meeting last week showed that officials may raise inflation-slowing interest rates earlier than anticipated.

Jason Ware is the chief investment officer at Albion Financial Group. He said that he’s evaluating whether or not to purchase more bank stocks, but is cautious because of concerns about higher yields being sustainable.

He said that history suggests that bank stocks are more likely to do well when there is a rate increase than during one.