** Goldman Sachs analysts expect costs to fall acrossEuropean banking sector by about 8 pct in Q3, offsetting a 2 pctdecline in annual revenue
** Say central theme of the sector is credible dividends -point to BNP, Santander and KBC asbeing "allowed" and "willing" to pay dividends
** Also say they see value in some restructuring themes,especially Unicredit
** 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 analysts see positive readacross from U.S. bankshaving reported strength in derivatives and FICC trading forFrench banks; say French banks derive 8-10 pct of revenue fromcorporate and investment banking
** Expect German banks Deutsche Bank, Commerzbank to underperform, produce a negative return on totalequity of about 4 pct, as non-operating items drive a loss atthe bottom line
** Say key focus for UK domestic banks will be impact ofrecent pricing changes on new business volumes, especially atLloyds, also say large UK banks may need to top uptheir PPI provisions
** Reiterate "sell" on Lloyds, saying rev pressure onlargest UK mortgage lender amplified by Brexit concerns
** Banks index hit a fresh post-Brexit high on theday, set for sixth-straight session of gains (venkateshasoumithri.mamidipudi.thomsonreuters.com@reuters.net)