Bank earnings may be 'frightful' (Reuters)

Informative article just posted to the Reuters website; hat-tip to Larry P.

By Jonathan Stempel | Mon Jan 12, 2009 6:22am EST

NEW YORK (Reuters)—Government efforts to prop up U.S. banks and savings institutions have only partly cushioned the blow from what may have been the industry’s worst three-month period since 1990.

“Credit trends are going to be bad,” said Gary Townsend, co-founder of Hill-Townsend Capital in Chevy Chase, Maryland. “No one is immune. If you are a bank, and have loans, you will suffer your share.”

Rising credit losses, poor economic conditions including a surge in unemployment, tighter lending margins and the cost of luring deposits are likely to dampen results at most of the nation’s biggest lenders for the just-ended quarter.

Dismal bottom-line results, however, will quickly fade into the rear-view mirror as investors focus on how much lenders plan to boost reserves for soured loans, take new steps to preserve capital, or eliminate more jobs.

Earnings season is set to kick off Thursday when Wisconsin’s Marshall & Ilsley Corp is scheduled to report. The largest lenders—Bank of America Corp, JPMorgan Chase & Co, Citigroup Inc and Wells Fargo & Co—report later in the month.

Results may be “frightful,” Sanford C. Bernstein & Co analyst John McDonald wrote. While credit and capital will be critical, he said falling margins will weigh on net interest income, while fee income may be “under siege” because of volatile capital markets and lower spending by customers.

Most of the largest lenders are expected to report lower earnings per share than a year earlier, according to analyst forecasts compiled by Reuters Estimates.

Citigroup and Alabama’s Regions Financial Corp may post losses, while Ohio lenders Fifth Third Bancorp and KeyCorp may come close to breaking even, analysts on average predicted.

Read the rest of the article.

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