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Avoid Financials: Bank Earnings Are Set to Slide

Flat or falling revenue will plague major bank earnings as second-quarter results are reported this week - delivering yet another blow to battered financial stocks.

Most of the big banks are expected to report a profit, but a falloff in equity trading volume, weak demand for loans, and costly legal headaches all ate into revenue, which will be a prime concern for already-skeptical investors.

All of the big bank stocks are down since the beginning of the year, several more than 20%.

"To say the least, it has been a challenging quarter for the universal banks, as concerns over a disappointing spring housing market, slowdown in the global economy and concerns over counterparty risk to European banks have all worked in concert to cause underperformance," Keefe, Bruyette & Woods analysts wrote in a note to clients.

JPMorgan Chase & Co. (NYSE: JPM) kicks off two weeks of big bank earnings later today (Thursday) followed by Citigroup Inc. (NYSE: C) tomorrow (Friday). Wells Fargo & Co. (NYSE: WFC), Bank of America Corp. (NYSE: BAC) and Goldman Sachs Group Inc. (NYSE: GS) are all slated to report Tuesday, with Morgan Stanley (NYSE: MS) expected next Thursday.

Analysts are expecting an average drop in big bank revenue of between 6% and 8%.



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