Financial exchange traded funds were the worst-performing sector ETFs on Friday as Citigroup (NYSE: C) and J.P. Morgan (NYSE: JPM) led shares of big banks to the downside.

Financial Select Sector SPDR Fund (NYSEArca: XLF) was down nearly 1% while the main stock indexes were down slightly. Financial ETFs are also trailing the overall market in 2011, essentially trading where they started the year.

Citi shares slipped nearly 1% Friday while J.P. Morgan was down 1.5% in recent action. Citi on Friday reinstated a quarterly dividend of a penny a share.

Big banks have been such poor stock performers that they have capped the gains in the Dow Jones Industrial Average this year. [Bank of America Trips Dow ETF]

However, some analysts think deal activity in the beaten-down financial sector could help turn its fortunes around. Keefe, Bruyette & Woods on Friday said Wells Fargo (NYSE: WFC) may fire the first shot.

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