Influential listed fund manager The Australian Financial Investment Company is continuing to rein in its exposures to the four major banks amid deepening concern over the earnings outlook for the sector.AFIC on Monday reported a 13.7 per cent increase in annual net profit to A$279 million, which was underpinned by solid gains on non-bank investments such as CSL, Sonic Healthcare, Alumina and a string of emerging mid-cap companies.General manager Geoff Driver told Banking Day that AFIC was underweight on its holdings of the major banks compared to the sector's weighting on the ASX."Many years ago the banks offered both earnings growth and attractive dividends, but they now face headwinds in terms of funding pressure, regulation and a softening housing market," he said."Given the nature of the banking industry and the regulatory pressures industry participants likely to encounter, we have been adjusting our holdings."A year ago, the four major banks accounted for 25 per cent of the total AFIC portfolio but that has been sliced to 21 per cent at the end of June.This is considerably lower than the market weighting of the majors, which collectively account for around 29 per cent of the S&P/ASX 200 index.Driver said the majors were still offering solid dividends and this was the main reason why AFIC retains significant stakes in the companies."We don't hold as much of the banks as we did, but a large proportion of our shareholders invest for an income stream so the banks remain attractive for the fully franked dividends they pay," he said.AFIC's negative outlook on the banking sector comes with an exception: Macquarie Group.Macquarie accounted for less than 0.9 per cent of the fund manager's portfolio in June 2017 but AFIC has been a consistent buyer of the stock since then and now holds shares worth $206 million in the investment bank.Macquarie accounts for almost three per cent of the portfolio."We see Macquarie in a different light to the four big retail banks, with its diverse global activities and its lower exposure to home lending," Driver said.Driver said the decisions by three of the major banks to exit wealth management meant that the domestic banking market now resembled its structure in the mid 1990s but without an earnings upside.AMP is another blue chip stock that AFIC has actively reduced its exposure to because of the reputational and operational problems that have flowed from the hearings of the Hayne royal commission.Driver observed that AMP's core wealth management businesses had been underperforming its banking arm, which now contributed 15 per cent of the group's earnings.He believes that the reputational damage stemming from the "fees for no advice" scandal could resonate for some time with the possible effect of eroding returns from wealth management."AMP has delivered a disappointing outcome - the franchise hasn't lived up to our expectations," he said."It remains to been seen, quite frankly, whether the brand can overcome its problems."Clearly, the value of that brand has diminished."