Citi Marks Down Banks

PNC warned last week in a Securities and Exchange Commission filing that it expects fourth-quarter earnings per share of 60 cents to 75 cents, with "adjusted" earnings of $1 to $1.15 a share. That was well below analysts' target at the time of $1.39, according to Thomson Financial.

PNC said in the filing that profits would be hit by "valuation adjustments" on $1.5 billion worth of commercial mortgage loans held for sale and lower trading results due to "unprecedented market price volatility," among other things.

Also on Monday, Citi analyst Bradley Ball cut ratings on several mortgage-related companies. He lowered his rating on Countrywide Financial(CFC) and mortgage insurer MGIC Investment(MTG) to hold. Ball also cut Capital One Financial(COF) and mortgage insurer Radian Group(RDN) to sell ratings.

"We expect consumer lenders/insurers to face further credit challenges as home prices decline 3%-5% in each of the next two years, mortgage rates reset and the macro economy slows," Ball wrote in his note. "Moreover, tightening lending standards and underwriting practices (as well as new regulatory guidelines) should initially compound the problems, making it generally more difficult for consumer lenders to grow out of the downturn."

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