Sector Snap: Big banks slump

NEW YORK - Shares of national banks fell Friday as investors continued to worry over the health of the financial sector following big fourth-quarter losses posted by Citigroup Inc. and Bank of America Corp.

The KBW Bank Index, which tracks 24 national and regional banks, fell 1.32 points, or 4 percent, to 31.60 in afternoon trading.

Citi shares fell 13 cents, or 3.4 percent, to $3.70 in afternoon trading. The bank, which once was the largest in the United States, posted a loss of $8.29 billion, its fifth straight quarterly loss, and said it will split in two its traditional banking business and its asset management and consumer finance segments.

Deutsche Bank analyst Mike Mayo noted Citi's results showed continued deterioration in credit quality, a surge in non-performing assets and a declining ratio of reserves to non-performing assets. He said the results were "worse than we expected."

Shares of Bank of America dropped $1.18, or 14.2 percent, to $7.14 by midafternoon after sinking as low as $7, its lowest point in 18 years, earlier in the day.

The Charlotte, N.C., bank posted a fourth-quarter loss of $2.39 billion after preferred dividends and struck a deal to receive $20 billion from the federal government to help it absorb Merrill Lynch. The Treasury Department and Federal Deposit Insurance Corp. will also provide protection for $118 billion in loans, mortgage-backed securities and other assets, much of which BofA assumed when it bought Merrill.

Shares of JPMorgan Chase & Co., which on Thursday reported a lower-than-expected profit, shed $1.52, or 6 percent, to $22.82.

S&P Equity analyst Stuart Plesser downgraded shares of the New York-based bank to "Hold" from "Strong Buy" earlier Friday, citing concerns it may have to cut its dividend as credit conditions continue to deteriorate. He cut his price target by $5 to $28. UBS analyst Glenn Shorr cited concerns about credit quality, along with lower earnings at JPMorgan's investment bank. He kept a "Hold" rating on the shares.

Also declining was Wells Far aftergo & Co., which lost $1.40, or 7 percent, to $18.76 after falling earlier to a 52-week low of $17.03. The San Francisco-based bank is due to report fourth-quarter results Jan. 28.

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