Report: Hard Road Ahead for Banks

Analysts at Merrill Lynch have reduced their ratings on the stock of Citigroup and Bank of America from "buy" to "neutral."

With regard to Citigroup, Merrill Lynch said in a report that the stock offers value "but has few positive catalysts and we are concerned estimates are too high."

They said Citi's spending is growing faster than revenue as the company tries to maintain or grow business volumes.

At Bank of America, Merrill Lynch says that a flatter yield curve and concern that the acquisition of MBNA could dilute earnings are reasons for the downgrade.

Also, Merrill Lynch said that $5 billion in "unrealized losses" on Bank of America's bond and derivative portfolios portend lower bond gains in upcoming quarters.

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