banks this quarter.

Analysts last week cut third-quarter earnings estimates for Chase Manhattan Corp. and J.P. Morgan & Co., which could also mean softer earnings for other bank holding companies with sizable trading operations.

"Chase will likely report little to no securities gains this quarter," said Sally Pope Davis of Goldman, Sachs & Co., adding that a "similar" pattern is likely at the other banks with trading operations.

Robust trading profits helped propel the largest banks to record earnings in the second quarter, but analysts noted that the market activity could not be counted on to continue indefinitely. Companies with international reach such as Citigroup Inc. and Bank of America Corp. could be affected, though trading declines could be offset by improvements elsewhere.

"There appears to be less liquidity, which tends to widen spreads and make it more difficult to profit," Ms. Davis said. She lowered her quarterly per-share estimate for Chase by 5 cents, to $1.36, and for J.P. Morgan by 36 cents, to $2.10.

Warburg Dillon Read reduced its third-quarter estimate for Chase to $1.28, from $1.33, though it held J.P. Morgan at $2.12. Friedman, Billings Ramsey & Co. lowered its Chase target by 5 cents, to $1.27, also citing market-related concerns.

The climate is "choppier" and could get worse, Ms. Davis said. "People are actually more concerned about the fourth quarter. No one really knows how Y2K will impact trading volume."

Chase reported second-quarter earnings of $1.4 billion, up 30% from 1998. J.P. Morgan earned $504 million, up 5%, also benefiting from the strong market.

But analysts say revenue from trading on behalf of clients is down significantly, reflecting a cooling market for stocks, bonds, and other investments. No major decline is expected in revenue from trading for the banks' own accounts because those activities were cut back a year ago in the aftermath of Russia's debt default.

Banks trade all sorts of investments for clients and profit by serving as middlemen, collecting fees for their services. Banks also earn fees when arranging deals between clients. All of these activities will be affected in the third quarter, analysts said.

Thomas H. Hanley of Warburg Dillon Read cited "market-sensitive earnings, in particular investment banking fees, trading, and private equity gains" in cutting his estimate of Chase's third-quarter earnings to $1.28.

Analysts are coming out with their assessments now because the quarter has progressed enough to give a flavor of how things will turn out. "They know enough about what's happening," said Carla D'Arista, a banking analyst with Friedman, Billings, Ramsey & Co. Her downgrade of Chase affected market activity Thursday before she had even released her report.

With the downgrades, analysts' consensus estimates are for Chase to earn $1.34 in the third quarter and for J.P. Morgan to earn $2.17, according to Thomson Financial First Call's compilation.

Chase, whose shares fell 5.2% Thursday, slipped 18.75 cents Friday, to $77.3125, despite a rally in bank stocks on favorable inflation news. J.P. Morgan shares dropped 43.75 cents, to $128.0625.

The impacts of the earnings revisions may have been tempered by the fact that the analysts all kept their "buy" or "strong buy" recommendations in place. At Goldman, Ms. Davis kept Chase on the "recommended list."

Its "core trends are sound," she said. "The company is expecting another excellent corporate finance quarter."

Ms. Davis said J.P. Morgan "has a viable growth strategy. It has gained significant share in its target investment banking and equity markets, continues its strong position in the derivatives markets, and continues to focus on productivity and refining its risk management and capital allocation processes."

Of Chase, Mr. Hanley said, "We want to stress that we still believe in their business model and feel comfortable with the company's ability to generate double-digit earnings growth for the foreseeable future."

Morgan, he said, "remains on track to achieve its financial goals, which include 15% to 20% return on equity and a mid-60% efficiency ratio."

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