Fourth-quarter U.S. bank results will show anemic lending and still-rising credit losses, but investors are focused more on 2010 outlooks for signs that the fledgling recovery might take hold this year, analysts said.

Investors in JPMorgan Chase & Co , Wells Fargo & Co and Bank of America Corp , as much as those in regional banks, will be seeking signs that loan demand could return this year and that the banks have finished putting aside money against future losses, the analysts said.

We're expecting weak earnings but a more positive outlook, said Anthony Polini, analyst at Raymond James.

Polini said he will be watching for the second-largest U.S. bank by assets to perhaps lower its expectations for home equity and credit card losses, and to have a small or no reserve build.

Smaller additions -- or even no additions -- to banks' loss reserves is a good indication that banks are getting back to business as normal and the sector is in recovery mode, analysts explained.

If (banks) feel confident about their portfolio quality, and therefore they can reduce their allocations to loan loss reserves, earnings are going to skyrocket, said David Dietze, chief investment officer of Point View Financial Services in Summit, New Jersey.

Analysts on average expect JPMorgan, seen as one of the best survivors of the credit crisis, to report fourth-quarter earnings of 61 cents a share on Friday, according to Thomson Reuters I/B/E/S. On the same basis, Wells Fargo is expected to report a 2 cent loss per share, while Bank of America is expected to post a 52 cent loss per share, both next Wednesday. Citigroup Inc is seen reporting a 33 cent loss per share on Tuesday.


Large regional banks such as U.S. Bancorp and PNC Financial Services Group
are expected to follow national banks in reporting that, while loan losses eased in the fourth quarter, the U.S. economy has not quite emerged from the severe recession and financial crisis.

Investors will be listening for signs from regional bank executives that they expect loan demand and revenues to pick up at some point in 2010, analysts said.

We're looking for any color at all that would suggest that inflection point is coming, said Bill Fitzpatrick, analyst at Optique Capital.

Still, many investors and analysts worry that large losses could be lurking in banks' books. French bank Societe Generale on Wednesday issued a profit warning following a 1.4 billion euro ($2 billion) write-down for risky assets. Associated Banc-Corp on Monday reported a fourth-quarter loss on a jump in loan losses, prompting it to sell more than $400 million in stock to shore up its capital levels.

That's another wild card, said Fitzpatrick. If there are banks that have to go back to the markets, are they going to be able to do that? he asked.

Even for the larger banks, some analysts expect earnings to be worse than current forecasts. For JPMorgan, some of the more accurate analysts, as assessed by Thomson Reuters StarMine's SmartEstimates, are expecting earnings to be as much 3.6 percent below the consensus.

On the other hand, StarMine's SmartEstimates shows that PNC's fourth-quarter earnings could be as much as 7.6 percent above the 75 cents a share consensus.

There could be other positive surprises too, such as dividend raises, that would indicate banks have confidence in the recovery, analysts said. Richard Bove, analyst at Rochdale Securities, told Reuters Insider that JPMorgan could increase its dividend 100 percent.

Across the board, the hope is that early signs of economic recovery at the end of last year will feed into an optimistic 2010 outlook, outweighing residual credit losses.

We are still expecting pretty good earnings, at least relative to a year ago, said Dietze of Point View.

(Reporting by Elinor Comlay; Editing by Richard Chang)