Major U.S. banks are slightly more than halfway finished absorbing loan losses from the financial crisis and building up reserves, Citigroup said Monday.

The firm's equity strategists further predicted that the banks will be only two-thirds finished with that process by the end of 2010, highlighting what is still likely to be a long slog.

Of the banks under coverage, Citigroup cited Wells Fargo & Co. (WFC) and PNC Financial Services Group Inc. (PNC) as furthest along among large-capitalization banks. First Horizon National Corp. (FHN), Synovus Financial Corp. (SNV), Marshall & Ilsley Corp. (MI) and Fifth Third Bancorp (FITB) are the mid-sized banks named.

On the other end of Citigroup's analysis were M&T Bank Corp. (MTB), Comerica Inc. (CMA) and BB&T Corp. (BBT), which Citigroup said have "heavy" exposure to commercial and industrial loans and commercial real estate.

Citigroup doesn't cover itself in the research note, which was released Tuesday morning.

Most Citigroup analysts forecast several quarters at minimum for banks to earn their way out of problem loans and return to "normal" earnings. In Citigroup's analysis, even banks regarded as relatively strong are expected to take a year or more.

J.P. Morgan Chase & Co. (JPM) is forecast to take about a year and a half, and Wells Fargo just over a year.

The banks cited as needing the longest time are Regions Financial Corp. (RF) and KeyCorp (KEY), just under three years.

The estimate follows an earnings season in which executives of several major banks pointed to a slowing in bad-loan growth as a sign of recovery, even though the total amount of such loans on most banks' balance sheets continued to rise.

-By Brendan Conway, Dow Jones Newswires; (212) 416-2670; brendan.conway@dowjones.com
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