Just when things were starting to look up for banks stocks, along came the earnings season.

Shares of the nation's banks fell sharply last week as fourth-quarter and annual earnings disappointed investors and prompted analysts to downgrade some of the nation's largest banks, including Wells Fargo & Co. and Chase Manhattan Corp. TRENDLINE

Analysts predicted net interest income would fall in 1995 at many banks, partly because of higher interest rates.

Even when earnings came in strong, investors shrugged off the news and sold.

For example, the day BankAmerica Corp. reported a 19% earnings jump, its stock fell 87.5 cents. And the day after Fleet Financial Group reported a 21% jump, investors dropped the stock, sending it down 6%.

In the two days before the selloff the sector had been enjoying strong rallies, fueled by news that the economy seemed to be slowing - a sign the Federal Reserve Board was unlikely to hike interest rates again.

But investor euphoria faded quickly as the earnings reports marched in: Chemical Banking Corp. down 48%, Chase Manhattan down 27%, Shawmut National Corp. down 36%.

"The earnings disappointments have made investors rethink their strategy in the sector, and the stocks have been sold off in the last couple days," said Michael Mayo of Lehman Brothers.

Added Smith Barney Inc. analyst Allison Deans, who downgraded Chase: "People are reassessing their views on where the numbers are going, because other interest-sensitive sectors are not being as hard hit."

A rare Goldman Sachs & Co. downgrade hit Wells Fargo. Analyst Robert Albertson warned that the bank's earnings had plateaued, and he took the company off his recommended list.

As if earnings were not enough, Fed officials were quoted as saying the economy was still too strong, dousing any hope the board would leave rates alone.

In the end, Groundhog Day came early for banks: The little fellow did not like what he saw, and this winter of discontent looks likely to continue for the beleaguered bank sector.

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