Don't Bank on a Bottom

"Most of the financials are accurately priced and there is no point in wading in there right now, because I think second quarter will be at least as ugly as [the] first quarter," says Christopher Whalen, managing director of Institutional Risk Analytics. "I think you could see banks consuming so much capital that some of them are going to go down a lot more."

Keefe, Bruyette & Woods, a midsize investment banking firm specializing in financial services companies, says of the 73 banks covered by KBW's research team, 48, or 66%, missed consensus earnings estimates for the first quarter. Operating earnings, which typically excludes special charges, had a median decline of 13%. Large-cap banks performed the worst, KBW says, with a 31% median profit drop.

Following first-quarter earnings, KBW cut earnings estimates for 62% of the banks under its coverage list.

In addition, credit metrics -- particularly at the largest banks -- "continue to indicate that asset quality is deteriorating at an accelerating pace," yet there has only been a "modest increase" in reserve ratios, writes KBW analyst Melissa Roberts in a note Thursday.

Deutsche Bank's Mayo echoed the sentiment. "The unique feature of this downturn is that the reserve-to-loan ratio was at a two-decade low even before considering the extra strain of going into a recession," he writes. And while banks are somewhat increasing that ratio, "loan loss reserves are still well below where they need to be," he adds.