NEW YORK (CNN/Money) - The major banks have been reporting excellent earnings for the fourth quarter and full-year 2003. The reasons for these strong profits are straightforward: An economic recovery is under way and interest rates are low.

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Except where there are complicating factors -- Washington Mutual, for example -- quarterly results should continue to be strong.

Shares of many major banks -- from Citigroup and J.P. Morgan Chase to MBNA -- have outpaced the S&P 500 over the past year. The key to continued bank stock momentum at this point is expansive monetary policy on the part of the Federal Reserve.

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At Wednesday's policy meeting, Fed chairman Alan Greenspan is expected to leave short-term interest rates untouched -- at a mere 1 percent, the lowest level in 45 years. And few analysts think Greenspan is anxious to raise rates. Some forecast that rates will remain low until fall; others expect rates to remain at rock-bottom levels until sometime in 2005.

Either way, bank stocks look fairly cheap relative to their growth rates and are likely to remain market leaders as long as interest rates stay so low. After all, rates are simply the price of money, and money is the chief raw material for financial services.

Among the stocks with positive earnings surprises, Citigroup (C: Research, Estimates) reported a near doubling of earnings per share. It also raised its dividend 14 percent -- the stock now yields 3.1 percent.

Bank earnings • Citigroup (C) • J.P. Morgan Chase (JPM) • MBNA (KRB)

Thanks to strong consumer spending right at the end of the holiday season, leading credit-card issuer MBNA (KRB: Research, Estimates) reported a 32 percent jump in earnings per share and raised its dividend 20 percent -- the stock yields 1.7 percent.

J.P. Morgan (JPM: Research, Estimates) beat estimates by 16 percent. Bank of America also beat expectations, with a gain of 8 percent. The stock has been less robust than its competitors, however, because of its ongoing merger with FleetBoston.

As the industry consolidates, the largest institutions stand to prosper. Nonetheless, bank-share performance often suffers during and immediately after a merger, since it typically takes at least a year to work out the kinks.

The one major stock that is lagging in this profit-fest is Washington Mutual (WM: Research, Estimates). The bank, which has been described as the best retail franchise in U.S. banking, is expanding rapidly, but is heavily exposed to the mortgage market.

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Mortgage lending has dropped off from its heady pace a year or two ago when interest rates were falling, and profit margins are narrower. The business is unlikely to recover quickly, since rates are likely to rise if they change at all. As a result, Washington Mutual recently reported a slight decline in earnings for the most recent quarter.

Because of its mortgage exposure, the stock is unlikely to keep up with other banks over the short term. Nonetheless, Washington Mutual looks like an excellent long-term value. At $45 a share, the stock has a long-term growth rate projected at 12 percent, trades at less than 11 times earnings and pays a 3.8 percent yield.

Michael Sivy is an editor-at-large for Money magazine. Sign up for free e-mail delivery of Sivy on Stocks every Tuesday and Thursday.