Real-estate related costs continue to hurt banks

Mortgage, home equity and residential construction markets continue to weaken, which will further pressure banks' second-quarter financial results, analyst Jason Goldberg wrote in a research note.

Among Lehman's coverage of large- and midcap banks, Goldberg said he anticipates net charge-offs--loans written off as not being repaid--to be about 1.6 percent of total loans. That compares with 0.8 percent in the third quarter of 2007, 1.1 percent in the fourth quarter and 1.3 percent during the first quarter of 2008, Goldberg wrote in the note.

Goldberg did note that using historical data from previous downturns in the credit cycle, current conditions have been met for a potential rally in bank stocks. Those conditions included the Federal Reserve becoming more aggressive, the onset of a recession and banks averaging a 50 percent relative price-to-book value, Goldberg wrote in the note.

Despite those conditions being in place, Goldberg thinks second-quarter results "could be pressured."

Among the biggest earnings cuts Goldberg made, he now expects Bank of America Corp. to earn 65 cents per share in the second quarter, 17 cents below the 82 cents he previously forecast.

Shares of Bank of America fell 91 cents, or 3 percent, to $29.59 as the broader banking sector fell sharply Monday afternoon. Earlier in the session, shares bottomed out at $29.58, their lowest point since October 2002.

Goldberg cut his estimate on JPMorgan Chase & Co. 35 percent, to 54 cents per share for the quarter from 83 cents.

JPMorgan shares fell $2, or 5 percent, to $38.09.

Goldberg cut his estimate for KeyCorp in half to 25 cents per share.