First-half operating expenses at the six biggest U.S. financial firms--Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley--grew $7.92 billion, or 5.9 percent, while revenue fell by $5.6 billion, or 2.2 percent, reports Bloomberg. For the third quarter, profits at these banks will decline nearly 30 percent sequentially if you believe the analysts.

What's going on? Well, the magnitude of the revenue drop-off may have been something of a surprise. But the move to hike expenses is certainly by design.

Banks are facing some huge revenue hits stemming from credit card reform and reduced lending and trading opportunities. They are all searching for offsets--which are hard to come by at this point.

Citigroup remains an interesting case study. CEO Vikram Pandit slashed expenses last year, putting the bank in position to expand this year, according to Bloomberg. It's spending more in core areas of corporate and consumer banking as well as trading and investment banking. It's also investing heavily overseas, notes Bloomberg. We'll see how quickly this will translate into higher operating earnings.

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