U.S. banks take center stage, economic picture mixed

By Jonathan Stempel and Jan Strupczewski

NEW YORK/BRUSSELS (Reuters) - U.S. banks, at the center of the world's financial crisis, will command investor focus on Friday with Bank of America and Citigroup results following strong showings from their peers.

Stock markets have rallied this week as better-than-expected earnings from several big U.S. companies have raised hopes of better times ahead.

But many experts say an ongoing stream of evidence of recovery is needed to propel them much higher. Broader economic data continues to be mixed.

JPMorgan Chase & Co said on Thursday record investment banking fees helped drive a 36 percent rise in quarterly profit but that credit quality in consumer mortgages and credit cards was deteriorating faster than it expected.

That warning tallied with analysts' fears that banks' improving performance could be confined to the second quarter when equities soared.

"Earnings from U.S. banks have been upbeat, but there are concerns that the positive results could be limited to the second quarter," said Takahiko Murai, general manager of equities at Nozomi Securities.

"Some institutions appear to hold significant bad loans and third-quarter results may not be as encouraging."

Earlier in the week, Goldman Sachs Group Inc said quarterly earnings surged 33 percent, just nine months after the U.S. Treasury bailed out the nation's largest banks -- many crippled with bad debts stemming from a U.S. housing market meltdown -- with $125 billion of taxpayer money.

But the trouble is far from over.

CIT Group Inc is scrambling to secure financing after the collapse of rescue talks with the government left the 101-year-old U.S. lender to hundreds of thousands of small and medium-sized businesses on the brink of bankruptcy.

Signs of upturn have come from IBM, which raised its full-year earnings forecast on Thursday, following leading chipmaker Intel Corp's stronger-than-expected earnings and outlook announcement this week.

European shares rose for the fifth day running, led by banks and commodity stocks ahead of earnings from Citi, Bank of America and General Electric.

Japan's Nikkei rallied for a fourth day and has gained just over 1 percent on the week.

ECONOMIC PICTURE PATCHY

The euro zone recorded a trade surplus in May as imports contracted more than exports, data showed on Friday.