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The quarter has hardly begun and, with analysts and investors watching nervously, the earnings crunch is about to begin anew. The following 11 big banks are among companies reporting results the week of April 14 to April 18.

These three are expected by analysts surveyed by Thomson Financial to be the the top performers in the first quarter, based on earnings growth from the same period of last year:

• State Street Corp. (NYSE: STT): 39%
• Bank of New York Mellon Corp. (NYSE: BK): 22%
• Northern Trust Corp. (NASDAQ: NTRS): 13%

These also happen to be three of the four forecast top performers from just before fourth quarter of 2007 results were reported back in January.

The five banks below are expected to report smaller quarterly profits than in the same period of the previous year:

• Wachovia Corp. (NYSE: WB): -65%
• JP Morgan Chase & Co. (NYSE: JPM): -51%
• Wells Fargo & Co. (NYSE: WFC): -14%
• U.S. Bancorp. (NYSE: USB): -3%
• M&T Bank Corp. (NYSE: MTB): -.6%

And the following three are expected to report losses:

• Merrill Lynch & Co. (NYSE: MER): -$1.90 per share
• Citigroup Inc. (NYSE: C): -$0.94 per share
• Washington Mutual Inc. (NYSE: WM): -$0.84 per share

Also compare these to the fourth quarter 2007 expectations. However, it may be worth pointing out that these three are all expected to narrow their losses from the previous quarter.

Overall, expectations for these lenders don't look so different than they did back in January, with some of the same players falling into the same categories. It may take a few surprises in next week's earnings reports to change that.

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MOST NOTEWORTHY:

• Goldman upgraded the Brokers and Asset Management sector to Attractive from Neutral as they believe an inflection point has been reached for stocks with minimal credit exposure, or where exposure is marked to market. Goldman expects the problem to shift to regional banks and specialty finance from brokers. As such, Goldman upgraded American Express (NYSE: AXP), Metlife (NYSE: MET), Bank of New York Mellon (NYSE: BK), Franklin Resources (NYSE: BEN), Janus Capital (NYSE: JNS) and NYSE Euronext (NYSE: NYX) to Buy from Neutral.
  
• Wachovia upgraded Pacific Sunwear (NASDAQ: PSUN) to Outperform from Market Perform based on valuation, merchandising improvements, operating efficiencies, favorable product mix, and reductions in underperforming categories.
  
• Rodman & Renshaw raised Metabasis (NASDAQ: MBRX) to Outperform from Market Perform on valuation given the potential for MB07803.

• HSBC raised Novartis (NYSE: NVS) to Neutral from Underweight.
  
• UBS (NYSE: UBS) was upgraded at Morgan Stanley to Equal Weight from Underweight.

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Bank of New York (NYSE: BK) is scheduled to report Q1 EPS on April 17.

BK has more than $23 trillion in assets under custody and administration and more than $1.1 trillion in assets under management.

BK call option volume of 5,199 contracts compares to put volume of 10,438 contracts. BK April option implied volatility of 56 is above its 26-week average of 38 according to Track Data, suggesting larger risk.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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MOST NOTEWORTHY:

• UBS downgraded Goldman Sachs (NYSE: GS) to Neutral from Buy. The firm believes liquidity problems and de-leveraging in the capital markets will get worst before they get better; UBS also downgraded Bank of New York (NYSE: BK), State Street (NYSE: STT) and Invesco (NYSE: IVZ) to Neutral from Buy.
  
• Following Bear Stearns' (NYSE: BSC) downfall, UBS also downgraded Lehman Brothers (NYSE: LEH) to Neutral from Buy and said the company could be the "next on the list" for the confidence/liquidity crisis by some investors.
  
• TD AmeriTrade (NASDAQ: AMTD) was downgraded to Neutral from buy at UBS and to Market Perform from Outperform at Friedman Billings. Friedman Billings downgraded TD Ameritrade citing slowing client activity as well as margin compression.

• JP Morgan cut Portugal Telecom (NYSE: PT) to Underweight from Neutral.
  
• Goldman downgraded Marathon Oil (NYSE: MRO) and Holly Corp (NYSE: HOC) to Neutral from Buy and removed Frontier Oil (NYSE: FTO) from its Conviction Buy List.

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Thomson Financial expects Bank of New York Mellon (NYSE: BK) to earn $0.69 when it announces its fourth-quarter results on January 17th. That's up 19% from the same period in 2006 when it earned $0.58.

Bank of New York Mellon is a New York-based bank that operates through three segments: Institutional Services, Private Bank & BNY Asset Management, and Corporate & Other. In the last year, its revenues were $5 billion and its net income totaled $2 billion. Its stock has gained 13% in the last year, and it now trades at a P/E of 19.9.

Bank of New York Mellon consistently beats estimates. In the second quarter of 2007, it beat the estimate by 1.6%, and in the third quarter it beat by 9.8%. My hunch is that it will beat expectations.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Bank of New York Mellon securities.

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The earnings of 10 banks expected to report in the next week suggest that while most banks will make money -- four will make more than last year, three will make less -- three others will be unprofitable.

Here are the top performers based on how much more they're expected to make this year than last:

• State Street Corporation +56%
• Bank of New York Mellon Corp. +19%
• Northern Trust +19%
• JPMorgan Chase & Co. +3%

Here are the three that are expected to make less money this year than last:

• M&T Bank Corporation -13%
• U.S. Bancorp -11%
• Wilmington Trust -7%

Here are the three that are expected to lose money:

• Citigroup Inc. ($0.97)
• Washington Mutual ($1.20)
• Wells Fargo & Company ($0.19)

These forecasts tell me that the banks that made more money last year got their revenues from helping the rich get richer. The ones that lost money helped the middle class and poor get poorer by issuing mortgages to people who couldn't afford them or holding mortgage-backed securities whose value they should have known were overestimated.

Peter Cohan is president of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup and Wells Fargo shares and has no financial interest in the other securities mentioned in this post.

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• Illinois Tool Works (NYSE: ITW) was initiated with a Neutral rating and $59 target at Banc of America, as they believe the challenging macro environment and tougher international comparisons will impact near-term base revenue growth and margin opportunities.
  
• JMP Securities believes shares of Perficient Inc. (NASDAQ: PRFT) have overreacted to weak 2007 organic growth and expects shares to be driven by an acceleration in growth in combination with accretive acquisitions. The firm initiated Perficient with a Market Outperform rating and $20 target.
  
• GATX Corp. (NYSE: GMT) was initiated with a Neutral rating at SunTrust on valuation.

• Credit Suisse initiated Bank of America with a Neutral rating and $48 target and Wachovia Corp. (NYSE: WB) with an Underperform rating and $35 target.
  
• Goldman initiated Bank of New York (NYSE: BK) with a Neutral rating.
  
• Morgan Stanley started WESCO International (NYSE: WCC) with an Equal Weight rating.

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Ted Allrich is the founder of The Online Investor and author of Comfort Zone Investing: Build Wealth And Sleep Well At Night. In this weekly column, he offers advice to investors who are just getting started.

If you own a bank stock, you know how brutal the stock market can be. Many are down more than 50% as the subprime mortgage mess continues to shock all investors. But some banks are being punished for being a bank, not for mortgages they don't even own.

Not all banks are the same. Most banks make mortgage loans to several different kinds of buyers for different types of properties: existing homes, new construction, and/or commercial buildings. Or they only make loans to well-qualified buyers, ones with good income and high FICO scores (your credit score). Still others make no mortgages at all, have a diversified revenue stream and are only guilty of being called banks. Finally, there are banks that have a large percentage of their revenues from international lending. Smart investors will look for all of these types and start investing a small amount in several of them, then wait for the rally that will inevitably come.

The banks that do processing and trust business are one group. Included are Bank of New York (NYSE: BK), State Street (NYSE: STT), and Northern Trust (NASDAQ: NTRS). For example, BK is one of the world's largest asset administration firms with the 2007 acquisition of Pittsburgh-based Mellon Financial. The merger fit in with the company's other areas of focus, asset management and corporate trust services. Now known as The Bank of New York Mellon, the firm has about $20 trillion in assets under custody and more than $1 trillion of assets under management. The company has a presence in over 35 countries, including more than 80 wealth management offices in the US and the UK. Its Pershing subsidiary is a leading securities clearing firm.

Another example: State Street Bank is among the top providers of mutual fund and pension processing and custody services; its target clients include large-scale institutional investors and corporations who can choose from a service menu that includes accounting, foreign exchange, cash management, securities lending, and more. Its State Street Global Advisors (SSgA) unit performs asset management services. Boston Financial Data Services, a partnership with DST Systems, provides shareholder services to clients. Another joint venture, CitiStreet (with Citigroup), manages retirement and pension plans.

There are others. And not just in banks. They are Savings and Loans, brokerage firms, insurance companies, all of the financials. Investors can find good stocks in each of these, ones that have no holdings in subprime mortgages or have great risk managers (think of Goldman Sachs (NYSE: GS) in the brokerage area). Just because the headlines look bad for many banks or financial institutions in general, it doesn't mean there aren't good investments among them. You just have to look harder and dig deeper to understand exactly what the bank or financial institution does.

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With the price of Thanksgiving dinner up 11% this year over last, the Fed won't help consumers because it's confident that inflation -- as measured by Personal Consumption Expenditures (PCE) will range between 1% and 2%. Meanwhile, Washington is happy to create lucrative business deals for Wall Street -- in the form of arrangements to manage and keep records of its Structured Investment Vehicle (SIV) bailout.

What is the Fed smoking? I don't know any personal consumption expenditures that are growing at 1% to 2%. The price of oil has quadrupled since January 2001 to $99.29 a barrel, gasoline prices are up 40% since last year, airfares have more than doubled -- a flight from Boston to Florida that cost $300 last year is now $700 -- and the dollar has lost 61% of its value since January 2001. I guess the Fed has decided to define PCE in a way that conveniently confirms its pro-inflation interest rate policy.

Meanwhile, the Treasury Department has backed a Super-SIV plan to bail out banks, such as Citigroup Inc. (NYSE: C) which created the $320 billion SIVs industry and invested the proceeds of SIV-issued commercial paper in now-worthless mortgage backed securities (MBSs).

Now the New York Times reports that BlackRock (NYSE: BLK) will probably get the lucrative job of managing the Super SIV, a job that includes the following duties:

• Managing the securities sold into the fund's portfolio,
• Deciding whether to sell an asset at a particular price or hold it to maturity, and
• Possibly determining the prices of the securities.

This last duty is the key. If Blackrock can determine the price of these securities it will be in a position to profit enormously. This is the ultimate irony that a Republican administration that allegedly believes in free market principles would dole out a government contract to let one firm set the price for these MBSs.

The whole reason that the SIVs need a bailout is that nobody is willing to buy them. Why not just let the market work by writing them down to zero and moving on? Not when there's political pork to be paid out.

Meanwhile, the lucrative job of custodian to the Super SIV -- which would oversee the financial record-keeping and other back-office operations for the Super SIV -- has yet to be assigned -- although speculation centers on Bank of New York Mellon (NYSE: BK).

Enjoy this good news for Wall Street as you fill up with $3.08 or more a gallon for gas on your drive to grandmother's house.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He owns Citigroup securities and has no financial interest in the others mentioned.

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• According to the Wall Street Journal's "Heard on the Street," as the economy continues to slow and the credit markets face further turmoil, high-profile companies like Countrywide Financial Corporation (NYSE: CFC) and The Home Depot Inc (NYSE: HD) are cutting back on buybacks as their shares drop.
• The New York Times reported that BlackRock Inc (NYSE: BLK) is expected to be the main asset manager for a $75B fund being created by Bank of America Corporation (NYSE: BAC), Citigroup Incorporated (NYSE: C), and JP Morgan Chase & Co (NYSE: JPM) to help stabilize the market fJor asset-backed securities, according to a source. The Bank of New York Mellon Corporation (NYSE: BK) is reportedly a leading contender to be a custodian of the fund.

• A ruling in Vodafone Group Plc's (NYSE: VOD) favor may cause Apple Inc (NASDAQ: AAPL) to rethink its business model for the iPhone device. The injunction against Deutsche Telekom AG (NYSE: DT)'s T-Mobile unit may force Apple to "unlock" its iPhones, the UK Times reported.
• Struggling airline UAL Corporation (NASDAQ: UAUA), along with its unit United Airlines, is struggling, but finding a carrier willing to merge may be a problem, BusinessWeek speculated.

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• publish economic forecasts quarterly, up from semi-annually. (These reports will include forecasts for economic growth, unemployment and inflation.)
• publish a 3-year horizon analysis, up from a 2-year analysis, and this section will also include "a narrative" that summarizes the views shaping the outlook, as well as the breadth of views among Fed governors.
• publish a price gauge prediction for headline inflation (which includes food and energy costs), as well as a prediction for core inflation.

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After falling sharply from the peak in mid-July through late last week, the S&P 500 index has staged a notable recovery. During the past five days (through approximately 11:30 this morning), the benchmark has gained 1.28%.

Yet despite the recent turnaround, financials continue to lag. The group (which has an equivalent exchange-traded fund, or ETF (NYSE: XLF) ) is down 0.55%, and of the 20 worst-performing index members over the five-day span, 11 are linked to banking or other financial services (see below).

Given the way problems stemming from the subprime meltdown have continued to spread, the fact that financial shares have not even held their own at a time when investors are reportedly "snapping up bargains" is a troubling sign.

Stock	5-day % return (through 11:30 am)
XTO Energy Inc	-3.53
Analog Devices	-3.73
Bank NY Mellon	-3.82	*
Broadcom Corp-A	-3.98
Jabil Circuit	-4.37
Capital One	-4.47	*
M&T Bank Corp	-4.50	*
Janus Capital	-4.72	*
Ambac Finl Group	-4.74	*
J.C. Penney Co	-4.97
First Horizon	-5.24	*
Wash Mutual Inc	-5.29	*
Natl City Corp	-5.63	*
Eog Resources	-5.83
Northern Trust	-5.92	*
Moody's Corp	-7.04	*
MBIA Inc	-7.97	*
Kohl's Corp	-8.14
Monster Worldwide	-8.19

(* = banking or financial services-related)

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle.

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In major corporate news, PepsiCo (Charts, Fortune 500) and Swiss food giant Nestle explored merger talks earlier this year, although a number of complications got in the way of any deal, according to a report in the Wall Street Journal.

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The markets moved higher with decent volume -for a summer holiday week- even though oil prices pushed past $71 a barrel. The June ISM Index came in at 56.0 gaining from May's reading of 55.0 indicating more manufacturing taking place.

The NYSE had volume of 2.5 billion shares with 2,617 shares advancing while 659 declined for a gain of 124.41 points to close at 9,997.43. On the NASDAQ, 1.9 billion shares traded, 2,000 advanced and 1,030 declined for a gain of 29.07 to 2632.30.

Trump Entertainment Resorts (NASDAQ: TRMP) hit a losing streak dropping $2.09 (-17%) to $10.49 after it ended sale discussions. Research in Motion (NASDAQ: RIMM) rose $14.27 (7%) to $214.26 continuing the gains it made Friday after earnings. The Bank of New York Company (NYSE: BK) announced it completed it's merger and gained $2.81 (7%) to $44.25. Rio Tinto (NYSE: RTP) rose $15.36 (5%) to $321.48 on higher metal prices.

In options there were 3.4 million puts and 3.9 million calls traded for a put/call open interest ratio of 0.88. CVS Corp. (NYSE: CVS) had volume on the November 37.50 calls (CVSKU) and the November 35 puts (CVSWG) with 27,000 contracts on each. Bristol-Myers Squibb Co. (NYSE: BMY) saw volume on the July 27.50 calls (BMYGY) with over 24,000 options trading.

Starbucks Corp. (NASDAQ: SBUX) saw an unusual number of July 32.50 puts (SQXSZ) with over 39,700 contracts crossing. Since options contracts can be bought and sold it can be hard to tell the traders intentions at times; since this transaction exceeds the open interest of 6,800 contracts it appears to be new volume and none of the other options strikes or months show an offsetting volume in excess of 2,000 contracts. Looking at the tape it appears two groups of 13,002 contacts each went through at 3:47 PM right before the close. These puts may be purchased to protect some existing stock holdings or more likely sold to in anticipation of the stock bouncing back up from its downtrend sometime in the next three months. Bear Stearns reiterated an Out-Perform rating on Starbucks and a $47 price target.
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Kevin Kersten is an Options Analyst with InvestorsObserver.com. Do you have any deadwood in your portfolio? Check out the 18 Warning Signs That Tell You To Dump A Stock.

Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

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