Sector Snap: Investment Banks Mixed

Bank investors may be holding onto shares because of high dividend rates, Oppenheimer analyst Merideth Whitney said in a note to investors. The current dividend yield of companies she tracks is the second highest of any year since 1990, she said.

However, banks are "dangerously approaching" profit levels that won't support high payouts. Shares of all financial companies, but particularly banks, are in danger of falling 25 percent from current levels, she said.

Citigroup Inc., according to her estimates, will earn $1.43 per share less than its dividend payment this year.

"How anyone, let alone Citi's management and the board, can believe that its dividend is safe given this earnings scenario is beyond our comprehension," she said.

Citigroup shares fell 60 cents, or 2.8 percent, to $21.19 in midday trading.

Shares of financial companies have struggled as turmoil in the markets brought on by risky bets on subprime mortgages led many financial companies to take large write-downs. Lenders are not willing to take on much risk, squeezing access to capital and slowing economic activity.

Shares of Bear Stearns Cos. also declined. JPMorgan Chase & Co., which is buying Bear Stearns for $10 per share, after its liquidity dried up, disclosed a lending agreement with Bear Stearns that secures any loans or lines of credit that it pays on Bear Stearns' behalf with liens on virtually all of Bear Stearns' assets. Also, it was disclosed after the market closed Thursday that Bear Stearns Chairman James Cayne sold his entire stake in the company, once valued at about $1 billion, for $61 million.

Shares of Bear Stearns fell 49 cents, or 4.3 percent, to $10.74. JPMorgan rose 67 cents to $43.53.

Elsewhere in the sector, Merrill Lynch & Co. fell 60 cents, to $41.30 and Goldman Sachs Group Inc. slipped $1.70 to $166.44.