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Big banks' stocks have recently been tossed around in a perfect storm whipped up by fears over bad loans, higher interest rates and stagnant capital markets.

But analysts and investors are betting that this typhoon of concerns will die down for the banks that show reasonable second-quarter results. They warn, however, that it could intensify for institutions that disappoint in the earnings season, which, for the large banks, stretches from the second week of July to the end of the month.


KBW Banks Index

rallied strongly from its mid-March doldrums, but over the past month it has fallen about 10%, testifying to the market's deep angst about financial firms.

Never Sleeping

Two banks' numbers should calm nerves, however:


(C) - Get Citigroup Inc. Report


Wells Fargo

(WFC) - Get Wells Fargo & Company Report

are likely to have among the most impressive results in the quarter, with analysts expecting both to report profits increases in the midteens this quarter over year-ago numbers. However, only Wells Fargo is expected to make more in the second quarter than in the first. (See table)

According to analysts surveyed by

First Call/Thomson Financial

, Citi, the nation's largest bank, is expected to earn 83 cents a share in the second quarter, up a hefty 17% from the year-earlier period, but down 20% from the first quarter, which was driven by exceptionally strong results at

Salomon Smith Barney

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as well as mammoth investment (read: private equity) gains of over $600 million.

But David Berry, head of research at

Keefe Bruyette & Woods

, a New York brokerage, still thinks Salomon, Citi's largest operating unit, will actually have an OK quarter, producing as much as $700 million in net income in the second quarter vs. $960 million in the preceding period and $610 million a year earlier. As for private equity, he thinks investment gains will be positive but small in the second quarter. Bad loans won't be a problem for Citi this quarter, he adds, but he does note that the bank recently warned about its exposure to troubled health care credits. (Berry rates Citi an outperform and his firm hasn't done recent investment banking work for it.)

Going to the Wells

The 63-cent forecast for Wells Fargo in the second quarter marks a respectable 15% gain over the year-ago number, and just over 3% above the first-quarter figure. The firm's impressive cross-selling abilities should continue to translate into good loan growth. Analysts say the San Francisco-based bank may actually benefit slightly from higher interest rates, which often hurt bank lending margins, because it's been quick to charge customers more for loans.

In addition, some hefty balance-sheet restructuring the bank did in the first quarter should already be paying off. People also like the bank because it has relatively strong

reserves against bad loans.

Not So Sure

Concerns exist about

Bank of America

(BAC) - Get Bank of America Corp Report

, even though it should manage to report higher earnings than last year: $1.23 per share vs. $1.15. However, some think the bank could fall slightly short of analysts' second-quarter profits predictions, and investors will be carefully analyzing their results for suspected higher nonpaying loan problems. "I suspect that Bank of America will miss the consensus estimate," says Adam Levy, financial services analyst on the


Invesco Financial Services fund, which doesn't own the bank's shares. The reasons? The bank probably won't be able to book the sort of private-equity gains it did in the first quarter, and analysts expect a rise in doubtful loans, which could force the bank to increase its bad-credit provision.



expected second-quarter profit of 83 cents a share is likely to be 20% below last year's $1.03. Sharply lower venture-capital numbers, and a likely decline in investment banking revenue, will be the chief culprits, rather than serious operating difficulties at the New York bank. What's more, when


stocks were far lower a month or so ago, analysts thought

Chase Capital Partners

, the bank's large private-equity arm, would report a loss; now they think it will break even in the quarter. But investors shouldn't forget to keep a close eye on Chase's non-capital markets businesses, like its consumer business, which contributes some 40% of operating revenue at the bank, and yet has performed sluggishly of late.

As for the large problem banks,

Bank One

(ONE) - Get OneSmart International Education Group Ltd Report

, under the new leadership of Jamie Dimon, is going to announce its long-awaited

restructuring along with second-quarter results.

First Union


has already announced its big

workout, more or less telling everyone what to expect this quarter, but investors will nevertheless pore over the numbers as they try to gauge the depth of the bank's problems.