Banks are likely to experience a decline in revenue for the third quarter as they grapple with political instability and unsettled debt and equity markets, Christopher Whalen of Institutional Risk Analytics said in a research note Tuesday. U.S. banks earned $58 billion in the first half of 2011, up 57% from the previous year. Whalen attributed the improved earnings to lower credit costs, while revenue remained flat to down. Total interest income for the first quarter hit $257 billion, down 6% from last year. This resulted not from the federal funds rate remaining near zero, but “the migration of bank deposits into noninterest bearing instruments,” he said. The Federal Open Market Committee has kept the target federal funds rate next to nothing since late 2008. Whalen said the FOMC “faces a difficult choice in the next several months as bank profitability from asset returns starts to fall more rapidly.” In his note, Whalen suggests the hyper-focus on how the Volcker Rule will impact bank results is somewhat inflated when considering the rule is not nearly as important as the lack of business volume and the political uncertainty heading into 2012. “American and EU politicians reached the limit of their incompetence many months ago,” according to Whalen.”Some analysts are fixated by the Volcker Rule implementation and its impact on bank earnings/revenue, but we see the lack of business volumes and political uncertainty going into 2012 as far more troubling trends in terms of non-interest revenue sources for all financials.” JPMorgan Chase (JPM) reports third-quarter earnings Thursday. Citigroup Inc. (C) and Wells Fargo (WFC) are set to report earnings for the three months ended Sept. 30 on Monday with Bank of America‘s (BAC) results coming Tuesday. Write to Kerri Panchuk.