BUZZ-EU Banks: Goldman sees fall in costs offsetting rev decline

** Goldman Sachs (NYSE: GS-PB - news) analysts expect costs to fall across European banking sector by about 8 pct in Q3, offsetting a 2 pct decline in annual revenue

** Say central theme of the sector is credible dividends - point to BNP (Paris: FR0000131104 - news) , Santander and KBC as being "allowed" and "willing" to pay dividends

** Also say they see value in some restructuring themes, especially Unicredit (EUREX: DE000A163206.EX - news)

** Say French banks are positive outliers in the sector, expect 3 pct gain in YoY revenue, point to BNP as their top pick (rated "conviction-list buy")

** GS (KSE: 078935.KS - news) analysts see positive readacross from U.S. banks having reported strength in derivatives and FICC trading for French banks; say French banks derive 8-10 pct of revenue from corporate and investment banking

** Expect German banks Deutsche Bank (LSE: 0H7D.L - news) , Commerzbank (LSE: 21170377.L - news) to underperform, produce a negative return on total equity of about 4 pct, as non-operating items drive a loss at the bottom line

** Say key focus for UK domestic banks will be impact of recent pricing changes on new business volumes, especially at Lloyds, also say large UK banks may need to top up their PPI provisions

** Reiterate "sell" on Lloyds, saying rev pressure on largest UK mortgage lender amplified by Brexit concerns

** Banks index hit a fresh post-Brexit high on the day, set for sixth-straight session of gains (venkateshasoumithri.mamidipudi.thomsonreuters.com@reuters.net)