Low interest rates and weak new mortgage volume continue to depress revenue at U.S. banks as the housing market begins tentative steps toward recovery, according to Standard & Poor's.

The picture is even worse considering these banks need higher reserves to cover representation and warranty claims made on previously originated mortgages.

Further, the ratings agency expects home prices, as measured by the S&P/Case-Shiller 20-city index, to fall another 4%. Analysts in another department at S&P expect the index will decline about 1% for January. The next S&P/Case-Shiller report is due March 27.

"If the market does enter another downturn, as evidenced by a steeper decline in home prices than we currently project and an increase in new delinquencies, we could take rating actions, depending on how it affects U.S. banks," said Matthew Albrecht, a credit analysts at Standard & Poor's.

As of the end of 2011, the banking stress index stood at 1.7, unchanged from the past two quarters, according to Institutional Risk Analytics. "This means that U.S. banks are still experiencing significantly elevated levels of operational stress compared with the benchmark year of 1995, which is equal to 1" in the BSI, said IRA.

Key in the fourth-quarter bank results was the drop in the number of "A+" rated institutions, the second time in 2011 that the trend toward improving bank results has shown signs of reversal, IRA said in a note published Thursday.

The first quarter of 2011 "is looking like the operational peak" of the U.S. banking industry during the age of the Federal Reserve's zero interest rate policy, the banking analytics firm said.

"The deterioration in earning assets in banks is accelerating, killing the profitability and lending capacity of U.S. banks in the same way that ZIRP is crushing savers."