Jul. 12--Bob Landaas' Milwaukee investment firm has been getting phone calls from clients wondering whether it's time to buy bank stocks.

"We get so many calls about how this bank or that bank is at $5 or $6, and, 'Bob, that's such a bargain,' " said Landaas, president of Landaas & Co.

His response to customers eager to invest in bank stocks isn't very encouraging.

"They're cheap for a reason. It's because the earnings aren't there," Landaas said. "It's all about earnings when you buy a stock. So often, people want to jump in on something that's been pummeled. And it's been pummeled for a reason."

Banks, already hammered by the collapse of the residential real estate market and now facing serious losses from commercial real estate such as shopping centers and office buildings because of the prolonged recession, aren't very attractive at the moment, investment professionals say.

The national KBW Bank Index of big banks is down about 20 percent so far this year, while the KBW Regional Bank Index is off about 39 percent. That compares with a loss of about 1 percent for the S&P 500 index.

The dismal showing for bank stocks is evident in Wisconsin as well, according to the Wisconsin Ticker, a monthly analysis of state-based stocks by Bloomberg News. The Bloomberg analysis shows that a $1,000 investment in Milwaukee's Marshall & Ilsley Corp. at the beginning of June would have been worth $729.48 at the end of the month, while a similar investment in Green Bay's Associated Banc-Corp would have fallen to $866.25 and, in Sturgeon Bay's Baylake Corp., to $723.40.

Bank stocks actually rallied for a few months this year, providing some short-lived enthusiasm for the sector.

"That rally was just off a very steep decline in 2008," said Bruce Bittles, chief market strategist for Robert W. Baird & Co. "I think going forward that the banks are likely to lag in terms of how they perform in the market, simply because they still have a lot of question marks about consumer loans, the housing situation and -- maybe more importantly -- the potential for the commercial real estate market to get much worse."

Potential losses on commercial real estate loans means banks will be setting aside more money in their loan-loss reserves -- allocations that cut directly into earnings.

"Until real estate stabilizes, the banks can't know the extent of their losses," Landaas said.

While everyone agrees it is crucial to the overall economy for the banking system to continue to strengthen, it's hard to envision banks returning to the kind of record profits they were posting before the housing bubble burst, analysts said.

"The financials have really been at the epicenter of this big market downturn," said Michael J. Francis, president of Francis Investment Counsel in Pewaukee.

There may be a few exceptions among individual banks to the prevailing gloomy outlook, Landaas said, but investors should not count on bank stocks as a group to lead a recovery of the stock market.

Said Bittles: "My feeling is that bank stocks are going to struggle from here."

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