Wells Fargo & Co.'s decline of 2.7% since the first quarter has come from its community-banking operations. New limits on overdraft fees trimmed revenue at the San Francisco- based lender by $380 million in the third quarter, Chief Financial Officer Howard Atkins told analysts on an Oct. 20 conference call.

Goldman Sachs and Citigroup, whose revenue fell 30% and 18% over the last two quarters, have been hampered by lower trading results. The two New York-based firms had the biggest drop of the six banks so far this year. Lucas van Praag, a Goldman Sachs spokesman, declined to comment. Shannon Bell, a spokeswoman for Citigroup, said it is "uniquely positioned to take advantage of growth opportunities in the emerging markets."

Drawing Down Reserves

At Morgan Stanley, a fall in fixed-income and equity trading drove revenue down 25% over the six months. Goldman Sachs and New York-based Morgan Stanley posted declines in fixed-income trading revenue of more than 37% from a year earlier, while Citigroup's investment banking revenue was down by 20%.

Lower credit costs and a less gloomy housing outlook allowed lenders to draw down reserves and set aside fewer provisions against consumer loan losses. That helped them to remain profitable. Net income for the first nine months was $39.6 billion for the six banks, compared with $39.5 billion for the same period last year. Still, some analysts questioned the growth prospects of an industry that made up as much as 20% of the profit from Standard & Poor's 500 Index companies before the financial crisis, according to Bloomberg data.

"That five- or six-year period during the boom, that was just purchase activity created by credit," said Christopher Whalen, a former Federal Reserve Bank of New York analyst and co-founder of Institutional Risk Analytics in Torrance, California. "The 'new normal' terminology, the cliche we all hate, is absolutely true. When you've withdrawn all of this credit from the economy, you're also taking a component of revenue out."

40-Year Trend

"We'll be lucky" if revenue growth for U.S. banks is flat this decade, Whalen said.

Financial companies have trailed the broader equity market this year. The S&P 500 Financials Index is up 1%, while the overall S&P 500 Index has climbed 6.3%. Bank of America and Morgan Stanley have each fallen more than 17% through yesterday, while Citigroup had the only increase among the biggest six, jumping 27% before today.

The six largest lenders are trading at an average of 0.9 times their book value, less than half the average level over the last 10 years. Bank of America's market value is about 53% of its book value, while Wells Fargo is trading at 1.2 times its book value.

Declining revenue growth rates for banks is a 40-year trend, according to FDIC data. U.S. banks had compound annual revenue growth of 12% from 1970 through 1979, about 10% during the 1980s, 8% in the 1990s and 6% over the most recent decade.