Bank stocks pummeled as worries mount
finance.yahoo.com
NEW YORK (AP) -- Fear that the global banking crisis is worsening sent financial stocks plunging Tuesday, with many companies' shares down by double-digit percentages and Citigroup Inc. diving to a 17-year low.
Disheartening news came from U.S. and British banks: They are still suffering losses from loans and are warning that those losses will not subside anytime soon. Regional banks as well as the big money center banks are struggling.
Regions Financial Corp., the Birmingham, Ala.-based bank that operates primarily in the Southeast, reported a fourth-quarter loss of $6.24 billion, or $9.01 per share, weighed down by a hefty charge to reflect declining value in its banking reporting unit.
Its stock plunged more than 24 percent to close at a 24-year low of $4.60.
Other regional bank shares also plummeted. SunTrust Banks Inc. lost $4.87, or 24.4 percent, to $15.07; Fifth Third Bancorp shed $1.21, or 22.3 percent, to $4.22; and Marshall & Ilsley Corp. fell $1.62, or 21.3 percent, to $6.
State Street Corp. shares, meanwhile, dove to a 13-year low after the commercial bank reported a 71 percent drop in fourth-quarter earnings and warned of a difficult year ahead. Though the bank achieved double-digit growth in both income and revenue in 2008, State Street said it expects 2009 results to fall flat. The bank, which received a $2 billion investment from the government last fall, had been performing better than most financial services companies, so the warning came as a surprise.
Its shares fell $21.46, or 59 percent, to end at $14.89. Earlier in the session, shares fell as low as $14.43, a level not seen since 1996.
Evidence that the banking crisis is worsening overseas also rattled investors. On Monday, the Royal Bank of Scotland forecast a loss of $41.3 billion in 2008. That led the British government to increase its stake in RBS to nearly 70 percent, essentially nationalizing the bank. Separately, the British government announced a new round of bailouts for the country's troubled banking industry.
Bank stocks also dropped in the aftermath of multibillion losses announced Friday by Citigroup Inc. and Bank of America Corp.
Citigroup, which reported a loss of $8.29 billion, hit a 17-year low Tuesday, dropping to $2.80.
The bank also said it will split itself in two; Citicorp will focus on traditional banking around the world, while Citi Holdings will oversee the company's riskier assets and tougher-to-manage ventures.
Bank of America shares closed down 29 percent at $5.10, bottoming out at a 19-year low of $5.05 earlier in the session.
The company faced additional pressure after Stifel, Nicolaus & Co. analyst Christopher Mutascio downgraded the stock to "Hold" from "Buy." Shares have fallen 49 percent so far this year as investors fear the bank may not be able to manage the rising losses in inherited from investment bank Merrill Lynch & Co., which it acquired at the height of the credit crisis last fall.
Mutascio has become particularly concerned about the government's growing stake in the Charlotte, N.C.-based bank. The U.S. last week agreed to pump an additional $20 billion into the bank as it struggles to absorb Merrill's losses. That was on top of an earlier $25 billion investment from the government in the form of preferred stock.
"The substantial government ownership of the company provides too much uncertainty as it pertains to government intervention and political pressures, sizable preferred dividend payments that represent nearly 23 percent of the company's peak earnings in 2006, and a significant headwind for income to common shareholders going forward," Mutascio wrote in a note to clients.
Bank of New York Mellon Corp. shares hit a 13-year low, falling to $15.44 in early trading before settling down $3.96, or 17 percent, at $19.
Meanwhile, Fox-Pitt Kelton analyst David Trone cut his 2009 estimate on JPMorgan Chase & Co. to $2.04 per share from $2.47 per share. While the bank reported better-than-expected fourth-quarter earnings last week, "the company is obviously not immune to the deteriorating credit environment and thus we expect higher credit costs and reserve builds until the first-half of 2010," Trone wrote in a note to clients.
Last week, JPMorgan reported a profit for the fourth quarter, but defaults surged in a wide variety of loans, ranging from home loans to credit cards to commercial real estate loans.
JPMorgan shares tumbled $4.73, or 20.7 percent, to $18.09. Shares hit a 7-year low of $17.70 earlier in the day.
Shares of Wells Fargo & Co., which will be the last big bank to report fourth-quarter results next week, also declined Tuesday. Shares fell $4.45, or 24 percent, to end at $14.23, after earlier falling as low as $13.82 -- a level not seen since 1998. |
