Concerns about profits and credit quality have not abated, but reports Wednesday by Merrill Lynch & Co. and Moody’s Investors Service tried to ease market anxiety over banking companies’ performance.

Merrill Lynch banking analyst Sandra J. Flannigan said in her report that the stocks of regional banking companies with a differentiated business mix should rise in value. “We think it is time to reassess regional bank portfolios,” she said, singling out Fifth Third Bancorp in Cincinnati, Commerce Bancorp in Cherry Hill, N.J., and Wells Fargo & Co. in San Francisco.

For other regional banks, promises of sustained double-digit profits over the long term are more questionable, she said. “In our judgment, consistent 10% to 12% earnings-per-share gains will be the exception rather then the norm of the next five years,” Ms. Flannigan wrote.

Credit losses will continue as the economic slowdown works its way through bank loan portfolios, she said. Ms. Flannigan believes that some of her peers are still too optimistic about asset quality. “Let us be absolutely clear, though, that we still believe industry credit problems are manageable,” she added.

Moody’s agreed that asset quality would continue to deteriorate over the next 18 months and that higher loan-loss provisions could dampen earnings. Still, its banking analysts’ report said, “We believe that major U.S. banks are well positioned to manage through the current downturn” because they can rely on strong recurring earnings to offset increased credit costs.

That might not save all banks from ratings downgrades, “but we seriously doubt that there will be a repositioning of the industry ratings profile as there was in the 1980s,” said Gregory Bauer, a managing director at Moody’s and co-author of the report.

Shares of banking companies did not budge much as a group on Wednesday, with the American Banker index of 225 banks gaining a slim 0.75%. Investment banks, however, had a good day. Merrill Lynch & Co. rose a hefty 6.35%, and Goldman Sachs Group surged 5.77%. The Standard & Poor’s 500 index ended almost flat, up 0.08%, and the Nasdaq composite rose 2.41%.

The ratings agency said that overall liquidity could get tighter in the credit market. Banks have begun to tighten their lending standards and to cut relationships with commercial customers that fail to deliver sufficient returns.

Consumer spending, on the other hand, exceeded the rise in personal income, leaving banks with a high exposure to consumer lending vulnerable. But most larger banking companies either have little to do with the riskier segment of retail lending or have exited that business completely, Moody’s wrote.

Deposit attrition is a key problem for banks with a sizable share of earnings dependent on retail banking. “We will monitor that trend closely to see if they can reverse it,” the Moody’s analysts wrote. Deposit growth is not expected to exceed 5% this year, their report said.

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