CNBC article - http://www.cnbc.com/id/25622269
Big Swings
Investors fear the unknown. Pronounced sentiment swings have left bank stocks in recent weeks regularly falling (and sometimes rising) several percent in a single day.
And while lenders have slashed payouts to preserve capital, the share declines have left many with high dividend yields that may be unsustainable if earnings stay depressed.
Citigroup and KeyCorp have yields of 7.8 percent and 7.1 percent, despite deep dividend cuts.
At Bank of America BANK OF AMERICA CORP NEW BAC
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[ BAC 22.36 
0.30 ( +1.36% ) 
] Regions Financial REGIONS FINANCIAL CORP NEW RF
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[ RF 9.48 
-0.12 ( -1.25% ) ] and SunTrust Banks [ STI 31.49 -0.53 ( -1.66% ) ] , which have not cut dividends, the yields are even higher -- 11.6 percent, 15.8 percent and 9.6 percent, respectively.
Housing problems have weighed particularly on lenders exposed to California, Florida, Michigan and Ohio.
Many lenders have already announced charges or reserve builds likely to substantially reduce or wipe out profit, including Wachovia and the Midwest regional banks Fifth Third Bancorp [ FITB 11.84 0.74 ( +6.67% ) ] , KeyCorp [ KEY 10.23 -0.30 ( -2.85% ) ] Marshall & Ilsley MARSHALL & ILSLEY CORP NEW MI
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[ MI 12.73 -0.13 ( -1.01% ) ] .
"There's going to be more bad news, more write-downs, more capital raises, more dividend cuts and more asset sales," said Lee Delaporte, director of research at Dreman Value Management in Jersey City, New Jersey.
Washington Mutual [ WM 5.25 -0.65 ( -11.02% ) ] , which is the largest savings and loan and raised $7 billion of capital last quarter, has said it expects mortgage losses of up to $19 billion by 2011.
But UBS and Lehman Brothers analysts said the number could grow. Lehman's Bruce Harting said the thrift's total credit losses over that period might reach $30 billion.
Losses Mount
Wachovia, meanwhile, might need to write down much of the $14 billion of goodwill it booked in 2006 when it bought Golden West Financial , a California option adjustable-rate mortgage specialist.
The bank now calls that purchase a mistake, and last week said it will stop offering option ARMs.
On Wednesday, Wachovia tapped Treasury Department Under Secretary Robert Steel, a key figure in the Bush administration response to the housing and credit crisis, as chief executive.
Meanwhile, at Citigroup, Chief Executive Vikram Pandit has had seven months to start a turnaround after more than $46 billion of losses and write-downs since the middle of 2007.
Pandit has pledged to shed $400 billion of assets and is expected to cut tens of thousands of jobs on top of more than 13,000 already announced by the largest U.S. bank.
But a third straight multibillion-dollar quarterly loss is expected, after Chief Financial Officer Gary Crittenden last month warned of possible substantial write-downs.
S&P's Plesser expects further write-downs in the second half, at least until home price declines slow.
"Higher levels of reserving are going to go on a lot longer," he said. "The uncertainty is whether charge-off levels really start to rise significantly quarter-over-quarter."
$35.45 (07/06/08)
