Stacks of $1 dollar notes move through a machine in Washington, D.C., U.S. (Photographer: Andrew Harrer/Bloomberg)

Banks: We Just Had a Record-Breaking Quarter. Shareholders: Meh

(Bloomberg) -- U.S. banks are churning out profits like never before, and shareholders just aren’t feeling it.

Corporate tax cuts helped the six largest U.S. banks produce combined net income that surpassed $30 billion for the first time ever. Their trading revenue was the highest in three years as they capitalized on volatile equity markets. Rising interest rates fueled revenue from lending.

Yet, most of the banks’ stocks have followed a similar pattern in recent days, initially rising as each company posted results only to erase gains as the hours wore on. Analysts and even some bank executives poured cold water on the sustainability of the performance.

“The environment couldn’t have been much better, and that’s what the market is wrestling with,” said Devin Ryan, an analyst at JMP Securities. “If it feels like it couldn’t have been much better, what drives things above and beyond where we currently are?”

The group of firms -- JPMorgan Chase & Co., Bank of America Corp., Wells Fargo & Co., Citigroup Inc., Goldman Sachs Group Inc. and Morgan Stanley -- finished posting results on Wednesday. Here are the main takeaways:

Tax Windfall

Lower corporate tax rates let the six banks keep about $2.9 billion more than they would’ve under the rates they faced a year earlier. That amounted to a 10 percent increase to profit.

The tax cuts are supposed to spur economic activity, such as lending and hiring. But loans at the four commercial lenders fell by a total of $2.5 billion in the quarter, and their combined headcount was still below where it was a year earlier.

To be sure, other factors may have damped loan growth, including higher interest rates and a Federal Reserve sanction of Wells Fargo, temporarily barring the bank from boosting assets.

Trading Revival

Equities trading was the standout, with every investment bank blowing past expectations in the most volatile quarter in years. U.S. stocks had their worst single-day plunge in almost seven years in February, and in the weeks that followed, President Donald Trump kept investors on their toes by ratcheting up threats on Twitter to impose tariffs on Chinese goods.

Banks: We Just Had a Record-Breaking Quarter. Shareholders: Meh

While commercial banks suffered from a lack of new corporate bond deals that drive some credit trading, fixed-income divisions at Goldman Sachs and Morgan Stanley topped estimates.

Banks: We Just Had a Record-Breaking Quarter. Shareholders: Meh

Regulatory Relief?

Trump’s administration has broadly promised to ease the industry’s regulatory burden, but analysts spent a lot of time on conference calls trying to discern how much leeway that may give to banks to boost payouts to shareholders. Much of the conversation drilled into how the Fed will run this year’s stress tests.

“If you look at this year’s scenario, it’s a lot more severe,” Bank of America Chief Financial Officer Paul Donofrio told analysts Monday. “Is that going to introduce uncertainty, and is that going to force all these banks to have to have more of a buffer?”

Yet there may be relief in store. On Tuesday, the Fed’s vice chair for supervision, Randy Quarles, signaled that executives may get more information about the tests than in past rounds. Authorities, he added, can do a lot to reduce the burden of the Volcker Rule, which limits the risks banks can take with their own money.

“It’s really clear in our discussions with the senior people at the Fed and the staff that they’re open, that they want to hear suggestions,” Goldman Sachs CFO Marty Chavez said that day. “They actively want to make the framework more simple and more transparent.”

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