Big US banks released their 2Q earnings last week. The figures were good thanks to robust growth in investment-banking income as well as a drop in loan-loss provisions. But banks also reported that wage costs were beginning to rise, and while a booming housing market has boosted mortgage-loan business, the renewed retreat in long-term yields has been a drag on interest income. In the main, however, the message from US banks is that business is good as a strong upswing takes hold. Combined with the resumption of dividend payouts and buybacks, our forecast that the rise in bond yields will resume and that US consumers will start taking our loans again allow us to be relatively upbeat on undervalued US banks (and their European counterparts), despite the

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