Bank Investors, This Is Going to Hurt

Still, the firm's analysts said they "do not expect many banks to discuss the 2009 outlook and those that do are likely to give a sobering sense of reality."

Capital raises remain prevalent in the banking sector, particularly as the credit environment gets worse. Throughout the rest of the year and into next year, credit costs will remain high, as the troubles seen in subprime and residential construction loan portfolios spread to other areas, including credit cards and prime mortgages, analysts say.

Several large banks have already warned of third-quarter troubles.

Late Monday, Bank of America reported earnings ahead of schedule, and the results were not pretty. The bank earned $1.18 billion, or 15 cents a share, down by more than two-thirds from the year-earlier period. BofA also announced plans to sell up to $10 billion of common stock and slash its dividend in half to 32 cents a share to shore up capital as credit losses intensify.

Oppenheimer analyst Meredith Whitney estimates that recent capital raises between Goldman Sachs (GS Quote), General Electric (GE Quote), JPMorgan Chase and BofA total $45 billion. In addition, depending on which bank wins Wachovia, Citi expects to raise an additional $10 billion, while Wells Fargo said it would raise $20 billion in capital.

"With such massive capital raises, we believe a 'sooner is better' mentality will prevail, as far as capital raises, and distinguish survivors and the more challenged among banks," Whitney writes in a note Tuesday.

Bank of America

Charlotte, N.C.-based BofA, which bought ailing mortgage lender Countrywide Financial in July and announced plans last month to purchase Merrill Lynch (MER Quote) for roughly $50 billion, said that credit quality is continuing to deteriorate as economic conditions drastically worsen.