U.S. banks' Q3 results to be mixed - Baird

(Reuters) - Robert W. Baird said U.S. bank results for the third quarter will be largely mixed, with some banks losing money as credit costs would overwhelm the pre-provision profits.

"Revenue should trend modestly lower quarter-on-quarter, driven by flattish spread revenue and moderating fee income trends," analyst David George said in a note to clients.

Moderating capital markets and mortgage revenue should lead to a sequential decline in fee revenue, partially offset by improved asset management and brokerage fees, George said.

The analyst said credit quality will continue to weaken in the third quarter at a decelerating pace, consistent with improving early-stage delinquency trends and macroeconomic data.

George said he still favours large-cap, consumer-oriented banks and expects best quarters from Wells Fargo (WFC.N), JPMorgan Chase (JPM.N), U.S. Bancorp (USB.N) and M&T Bank(MTB.N).

The analyst expects weaker quarters from Synovus Financial Corp (SNV.N), SunTrust Banks (STI.N) and Zions Bancorp (ZION.O).

"As the credit cycle matures, we believe higher reserve levels, diversified revenue streams, and greater leverage to stabilizing consumer credit trends will remain key determinants of which companies will reach normalized EPS estimates the fastest," the analyst said.

(Reporting by Sakthi Prasad in Bangalore; Editing by Maju Samuel)