Citigroup: U.S. Banks’ Profits to Decline 45% in Third Quarter

U.S. banks’ profits are expected to decline an average of 45% during the third quarter, according to Citigroup (NYSE:C), with volatile credit markets and the global equities sell-off paring earnings from trading and investment banking.

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Citigroup estimates that Morgan Stanley (NYSE:MS) will post a profit of 25 cents a share, well below the previous estimate of 36 cents a share. Meanwhile, the estimate for Goldman Sachs (NYSE:GS) has declined from $2.70 to just 10 cents a share. JPMorgan (NYSE:JPM), remaining the most profitable bank in the U.S., is expected to report earnings of $1.17 a share, down from an earlier estimate of $1.26.

Citigroup has also pared down profit estimates for the next two years, with new capital requirements, slowing economic growth, and the European debt crisis weighing on banks. Unfortunately, the downgrade comes “at a time when there’s a lot of uncertainty over Europe,” says Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. “A downgrade of that magnitude won’t do anything for investor confidence.”

Only Bank of America (NYSE:BAC) is looking at a slightly higher third-quarter profit estimate, raised from 18 cents a share to 61 cents a share after the bank sold its stake in China Construction Bank Corp., making for a one-time gain.

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