Banks are continuing to wobble, and Morgan Stanley has poured fuel on the fire by downgrading both Royal Bank of Scotland after yesterday's results and Barclays.
Morgan Stanley's analysts Michael Helsby and Steven Hayne said: "With the domestic banks results season behind us, we now believe sentiment for the UK banks is likely to turn back down as macro and write down concerns rebuild."
The results season is not quite over, however, as they acknowledge.
"Monday brings HSBC's full year results, which will provide a stark reminder of how quickly credit can deteriorate in an environment of highly leveraged consumers and falling house prices. No doubt HSBC will also give its own perspective on the UK banking market, which, if you agree with Lloyds TSB, is the second best in the world - we don't. HSBC is likely to provide a less rosy and probably negative view of the consumer and housing market, unsettling the sector.
"After HSBC we expect the first quarter US reporting season to deliver further losses and unsettle investors on the trading outlook for investment banks. This is likely to knock confidence in RBS and Barclays further."
As a result they have cut RBS - down 17p to 385p - from equal weight to underweight and Barclays - 21p lower at 479.5p - from overweight to equal weight.
Elsewhere HBOS is now down 25.5p to 609.5p. As well as the worries about possible bad debts, the mortgage bank has been undermined by a gloomy housing market survey by rival Nationwide.
The FTSE 100 is 67.2 points lower at 5898.5, as Wall Street falls nearly 190 points after a poor business activity report from Chicago, increasing fears the US might be going into recession.
