Sector Snap: National Banks

Shares of national banks were mixed Friday after Citigroup Inc. posted a steep loss because of continued problems in the credit markets, but still beat analysts expectations.

It was the third straight day a national bank beat analysts expectations. Earlier this week, JPMorgan Chase & Co. and Wells Fargo & Co. reported second-quarter profits that fell, but did not slip as much as analysts predicted.

Citigroup shares rose sharply on the news, though other banks declined giving up gains made earlier in the week. Shares of Citigroup rose $1.65, or 9.2 percent, to $19.62 in morning trading.

Before the markets opened, Citigroup said it lost $2.5 billion, or 54 cents per share, during the quarter ended June. But, the loss was not as bad as analysts expected. Analysts polled by Thomson Financial, on average, forecast a loss of 66 cents per share.

Write-downs continued to be a problem for Citigroup. The New York-based bank reduced the value of investments by $7.2 billion during the second quarter.

Banks like Citigroup have taken billions of dollars in losses as the value of mortgage-backed securities and other debt has plummeted over the past year. Investors have shied away from purchasing all but the safest debt as mortgages increasingly defaulted last year leading to fears securities backed by the troubled loans would default as well.

Retail banks have also had to set aside more cash to cover defaulting mortgages and loans in their lending portfolios, further adding to their problems.

Despite the better than expected results earlier this week, both JPMorgan and Wells Fargo fell slightly.

JPMorgan shares declined 67 cents, or 1.6 percent to $40.13.

JPMorgan earned $2 billion, or 54 cents per share, during the second quarter. Analysts expected the New York-based bank to earn 44 cents per share.

Wells Fargo earned $1.75 billion, or 53 cents per share, during the second quarter, 3 cents per share better than analysts' average estimate.

Wells Fargo shares fell 8 cents to $27.75.

Elsewhere, shares of Washington Mutual Inc., which at the beginning of the week said it had plenty of spare capital to handle the current downturn in the market, rose 27 cents, or 5.4 percent, to $5.26.

Bank of America Corp. shares rose 89 cents to $27.38.

Wachovia Corp. slipped 9 cents to $13.35.