Wells Fargo said net loan charge-offs as a percentage of average loans rose to 2.11% in the second quarter from 1.54% in the first quarter as credit conditions worsened.

“We expect credit losses and nonperforming assets to increase, although we’re beginning to see some moderation in the rate of growth of losses in a number of consumer portfolios, as evidenced by some stabilization in early stage delinquencies,”said Chief Credit Officer Mike Loughlin in the earnings release.

The stock gapped down 7.6% this morning, but has rallied so far to regain half of that gap down. We’ll have to see how it finishes.

Stripping out one-time items, Morgan Stanley posted a loss of $1.37 a share, much worse than analysts’ average forecast of a loss of 53 cents, according to Reuters Estimates.

We’ll see how the stock finishes today but so far it has rallied from about a 5% gap down to flat at this point.

However, Citi’s profit was not driven by improved trading like other banks, and instead came from the gain on the sale of its Smith Barney unit and the increasing values of some of its riskier assets that had plunged during the credit crisis. Citi recorded an after-tax gain of $6.7 billion on the sale of a majority stake in its Smith Barney brokerage unit to Morgan Stanley.

After paying preferred dividends, the New York-based Citigroup earned 49 cents per share versus a loss of $2.59 billion, or 55 cents per share, during the same quarter last year. Analysts forecast a loss of 37 cents per share for the quarter

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Earnings per share, which reflected a much higher amount of shares outstanding, fell to 33 cents from 72 cents. That was well ahead of the 28 cents per share forecast of analysts surveyed by Thomson Reuters.

The results also reflected a $5.3 billion pretax gain from selling part of the bank’s stake in China Construction Bank Corp. and a charge to bolster a federal deposit insurance fund.