Sector Snap: National bank stocks mostly fall

NEW YORK - Shares of national banks mostly fell Wednesday, as investors' concerns about future losses in the sector lingered. Profit estimate cuts by an Oppenheimer & Co. analyst also weighed on the stocks.

Investors have become increasingly worried in recent weeks that the deteriorating economy and still-turbulent markets will slam banks with more write-downs in the coming quarters. Of particular concern are weakening trends in both credit card and commercial real estate portfolios.

Financial stocks got a boost earlier in the week after the government unveiled a plan to inject a fresh $20 billion into troubled banking giant Citigroup Inc. and guarantee up to $306 billion of the bank's risky assets.

Then on Tuesday, the Treasury Department and the Federal Reserve said they would provide $800 billion to help unfreeze the market for consumer debt and to make mortgage loans cheaper and more available.

Still, the potential for increased write-downs and rising loan losses remain a concern. In a note to clients Wednesday, Oppenheimer & Co. analyst Meredith Whitney said she expects banks in her coverage area to incur more than $40 billion in write-downs and loan loss provisions in the fourth quarter alone. What's more, she believes banks will need to post an additional $25 billion in loss reserves over the next year.

Subsequently, Whitney trimmed her full-year estimates on a handful of banks.

She now expects Citigroup to post a loss of $3.02 per share. Previously she forecast a loss of $2.87 per share.

Whitney also cut her estimate on Bank of America Corp. to $1.18 per share from $1.55 per share.

Additionally, she trimmed her estimate on Wells Fargo & Co. by a penny to $1.72 per share, and her estimate on JPMorgan Chase & Co. by 50 cents to $1.11 per share.

In early afternoon trading, Citigroup shares jumped 72 cents, or 12 percent, to $6.79.

Bank of America fell 52 cents, or 3.6 percent, to $14.28, while JPMorgan Chase lost 40 cents to $29.37.

Wells Fargo, which is buying Wachovia Corp., gained 21 cents to $27.16. Wachovia shed 1 cent to $5.22.

Whitney also cut her estimates on Goldman Sachs Group Inc. and Morgan Stanley, which both received government approval to become bank holding companies in September. The change in status, which was prompted by the bankruptcy of rival investment bank Lehman Brothers Holdings Inc., allows the firms to build a large deposit base and gives them permanent access to Federal Reserve financing.

Whitney now expects Goldman Sachs to post a profit of $7 per share and Morgan Stanley to earn $4.21 per share. These are down from prior estimates of $11.58 and $4.24 per share, respectively.

Goldman Sachs rose $2.53, or 3.6 percent, to $74.31, while Morgan Stanley fell 1 cent to $14.26.

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