Battered Banks Look for Earnings Boost

It's show-me time for the banks.

The nation's biggest financial institutions are getting set to issue second-quarter earnings reports this week. JPMorgan Chase(JPM Quote) will lead the profit parade off Wednesday, to be followed in short order by Citigroup(C Quote), Bank of America(BAC Quote) and Wachovia(WB Quote), among others.

The big banks have been showing solid numbers, but shares across the sector have been hit this year by worries about possible credit losses and slowing revenue gains. Smaller regional banks have struggled to overcome loan losses fueled by a declining housing market.

Analysts expect the big banks to post strong gains, bolstered by a boom in M&A advisory business and the recent record run in the stock market.

The large banks are not "tied in like many of the regionals to spread income and you have a good balance of fee-generating activities," says Frank Barkocy, the director of research at Mendon Capital Advisors and the former director at hedge fund manager, Keefe Managers. "They're less vulnerable to major negative surprises in the marketplace."

In the first six months of the year, JPMorgan Chase and Citi together generated about $6.5 billion from global investment banking activities, according to Dealogic. JPMorgan Chase brought in $897 million in investment banking fees from private-equity firms.

"The folks that have capital markets exposure will do well ... because it's been a strong second quarter," says Meredith Whitney, an analyst at CIBC World Markets.

Want more? Check out TheStreet.com TV video. Laurie Kulikowski takes a closer look at the latest earnings reports in the battered banking sector.