Updated from 1:59 p.m. EDT

Financial stocks were mixed Tuesday afternoon as three major U.S. banks sought government approval to repay government bailout money.

Goldman Sachs

(GS) - Get Report

,

Morgan Stanley

(MS) - Get Report

, and

JPMorgan Chase

(JPM) - Get Report

have

applied to refund

a combined $45 billion of government preferred equity investments,

Bloomberg

reported citing people familiar with the matter. The three banks need approval from the

Federal Reserve

to return the money, according to the report.

Meanwhile, Credit Suisse raised its price target for Morgan Stanley shares to $28 from $26, based on improved market conditions. The firm also increased its earnings estimates for Morgan, raising its full-year earnings target to $1 a share from 95 cents. For the second quarter, Credit Suisse now expects earnings of 40 cents a share compared to its previous view of 15 cents, as the firm believes core business trends have improved, bid-ask spreads remain healthy, and loss ratios are down.

The analyst move came as Morgan Stanley announced that it is commencing a secondary offering of all of its remaining ownership in

MSCI Inc.

(MXB)

, which will complete the separation that began in 2007. The offering will consist of 27.7 million shares of MSCI class A common stock, par value of a penny a share. MSCI Inc. will not receive any of the proceeds from the sale of the class A common stock.

Morgan Stanley shares rose 2.2% to close at $28.91. Goldman shares gave back 1.4% to $141.15 and JPMorgan shed 3.9% to $35.81.

Among other bank stocks,

Citigroup

(C) - Get Report

added 3.6%, while

Bank of America

(BAC) - Get Report

retreated 4.1% and

Wells Fargo

(WFC) - Get Report

slid 5.7%.

Elsewhere,

American Express

(AXP) - Get Report

said late Monday it will cut roughly 4,000 jobs, or about 6% of its workforce, as part of an effort aimed at saving roughly $800 million for the rest of the year. The announcement comes seven months after AmEx reduced its headcount by 7,000 workers.

Credit Suisse also published a research note on AmEx, raising earnings targets for 2009 and 2010 by 10 cents each to $1.50 and $1.90 a share, respectively. The changes reflect the staff reduction savings through the restructuring plan. AmEx shares closed down 5.1% to $24.79.

In other analyst news, RBC Capital Markets upgraded

State Street

(STT) - Get Report

to a top pick from outperform and raised its stock price target to $55 from $40. RBC said it expects the tangible common equity, or TCE, ratio by year-end to be in excess of 6%, which will put concerns behind the bank by the end of the year. RBC says that in 2010, State Street can shift the strategic focus from conservation of capital to more of a growth strategy.

Late Monday, State Street announced a common stock offering of $2.0 billion, or 51.3 million shares, priced at $39 a share. The bank estimates that net proceeds will total about $1.9 billion, after deducting estimated expenses and underwriting discounts and commissions, or about $2.2 billion if underwriters fully exercise their option to purchase 7.7 million additional shares. State Street plans to use the money to pay back $2 billion in funds borrowed through the TARP. Shares of State Street climbed 3.4% to $43.21.

Raymond James upgraded

OptionsXpress

,

Charles Schwab

(SCHW) - Get Report

, and

TradeStation

(TRAD)

to outperform, and upgraded

TD Ameritrade

(AMTD) - Get Report

to strong buy.

BlackRock

(BLK) - Get Report

preliminarily has been granted a second-round interview with the Treasury Department to become one of a few money managers to buy toxic assets from U.S. banks, using taxpayer money,

The Wall Street Journal

reports, citing people familiar with the matter. Shares of BlackRock finished down 3.2% to $139.68.

In earnings news,

Mitsubishi UFJ Financial Group

(MTU)

reported a $2.6 billion annual loss, swinging from a year-ago profit due to writedowns of securities, as the Japanese bank had projected earlier this month. MUFG said it expects a profit for the fiscal year through March 2010, but shares ended lower by 1.1% at $6.39.

Small and midsize U.S. banks could suffer $100 billion in losses generated by commercial real-estate loans by the end 2010 if economic woes deepen, according to research conducted by

The Wall Street Journal

. Total losses at those banks could surpass $200 billion over that period, according to the

Journal's

analysis, which utilized the same worst-case scenario employed by the government's stress tests of 19 major U.S. banks.

The

Journal

also reported that

Lehman Brothers

said in a court filing that its broker-dealer and investment banking services were likely undervalued in a hasty deal struck in September to unload the businesses to

Barclays

(BCS) - Get Report

. Lehman suggested the arrangement resulted in a "windfall" in "the billions of dollars" for Barclays, according to the report. Barclays shares rose 1.4% to $17.75.