10 Banks with Lower Earnings On Tap

NEW YORK (TheStreet) -- TheStreet has identified 10 profitable bank holding companies expected to see a decline in earnings during 2011.

For some of these banks, including Bank of the Ozarks (OZRK), analysts' reduced earnings expectations for 2011 reflect elevated 2010 earnings from gains on bargain purchases of failed banks from the Federal Deposit Insurance Corporation.

For others, including TCF Financial (TCB), fee income declined during the second half of 2010 as new rules were implemented in August requiring that banks only provide overdraft protection for ATM and debit card transactions to depositors who opt-in for the service. Reduced earnings expectations for TCF reflect a full year of the new opt-in rules, along with more declines in fee revenue expected when the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act - signed into law by President Obama in July 2011 - is implemented, which will lower interchange fees on debit card purchases.

SNL Financial analyst Tyler Hall told TheStreet that the Durbin Amendment in its current form would "have anywhere from a 75% to 85% impact on debit card interchange revenues, which have historically been a profit center for many banks."

Two of the holding companies we identified are facing extraordinary expenses tied to regulatory agreements with the Office of Thrift Supervision, including TFS Financial (TFSL), which has already entered into a memorandum of understanding (MOU) with the regulator, and Hudson City Bancorp (HCBK), which recently warned that its main subsidiary Hudson City Savings Bank is likely to be required to restructure its balance sheet, leading to "a material charge to earnings."

To come up with our list, we isolated the 10 bank and thrift holding companies with average daily trading volume of at least 50 thousand shares, that were profitable in 2010 and were expected by analysts polled by Thomson Reuters to have the largest percentage decline in earnings for 2011. All data was supplied by SNL Financial.

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