Though capital markets are showing signs of life after months of turmoil, fourth-quarter earnings predictions for some banks have grown gloomier.

Consensus forecasts have dropped dramatically over the last six weeks, from already low levels.

According to First Call Corp., analysts estimated at the end of the third quarter that money-centers would earn 6% more per share, on average, in the fourth quarter than a year ealier.

Now that same group of banks -which includes Citigroup, Chase Manhattan Corp., and J.P. Morgan & Co.-is expected to report an average 2% decline.

Analysts attributed the bleak outlook to continued worries about the group's ability to generate revenues and control expenses if global markets remain volatile. However, these analysts said, the money-centers have probably weathered the worst of the storm.

Money-centers are big banks involved in significant overseas lending and trading. In the third quarter their average per-share earnings were down 50% from a year earlier.

There is a "level of uncertainty" about what the fourth will bring, said David S. Berry, director of research at Keefe, Bruyette & Woods. "Five or six weeks ago, the world was supposed to end-and it didn't."

Officials at several money-center banks declined to comment. But John M. Morris, a spokesman for Citigroup, said, "Our perception is that analysts and investors are aware that fourth-quarter conditions may be improving but they have not been returning to normal levels."

Across the industry, money-center banks took the biggest hits to earnings in the last quarter as global market turbulence forced steep trading losses in foreign securities. In addition, market uncertainty dried up much of the underwriting, venture capital, and advisory work that had been contributing to record profits.

Many analysts have slashed their fourth-quarter estimates for money- centers despite evidence that such activities have rebounded. Regional and smaller banks are also expected to report lower profits.

According to First Call, the outlook for all banks, including large regionals, has dimmed since Oct. 1, from 9% average earnings-per-share growth to 4%. The S&P 500 stocks are expected to do better, averaging 6.8%.

As for banks, "there are worries that there will be a repeat of the third quarter," said Charles Hill, director of research at First Call. "Analysts don't know what else is out there."

Observers said that though money-centers are not expected to suffer severe losses in the present quarter, they are still struggling to make up for lost ground.

Some analysts said the market has lingering anxiety over trading results, even though stock markets have rebounded from their lows in August and September.

Banks may also be talking themselves down to avoid negative surprises, these observers said. "There is no harm in having lower expectations," said George Bicher, of BT Alex. Brown.

Analysts were careful to note that fortunes could turn quickly in the coming weeks. Already, mergers and acquisition advisory activities have picked up, signaling better conditions for banks like Chase Manhattan and Morgan.

Mr. Morris said business at Citi's Salomon Smith Barney unit, which posted a loss of $325 million for the third quarter, has "not regained its former levels but certainly has improved."

Mr. Berry said bank executives are starting to get more certain about their own growth targets. "In the last few weeks you could have really pushed them around" on the subject, he said, "but they are starting to regain their confidence."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.