The KBW Bank index is also down about 6 percent since the beginning of January.
"It's kind of a little bewildering against the backdrop of a very strong U.S. economy," said Morgan Stanley CEO James Gorman on Tuesday, in response to an analyst question about the firm's stock price this year. "We're overweight the U.S. and gaining share across each of the institutional businesses."
Rising rates are both good and bad for banks: They boost profits from lending. But, when they get high enough, they tend to discourage companies and consumers from borrowing. There are other factors at play in the markets, however, including worries about trade skirmishes and political uncertainty.
J.P. Morgan Chase CEO Jamie Dimon raised concerns Friday that rising interest rates and geopolitical flareups could derail U.S. economic growth, but added that is not the case at the moment.
"The economy is still very strong, and that's across wages, job creation, capital expenditure, consumer credit; it's pretty broad-based and it's not going to be diminished immediately," Dimon said in a media conference call following his bank's earnings report. "I was pointing out the probabilities that I thought were higher that rates would go up. I still believe that. I do think you're going to see higher rates."
J. P. Morgan's outlook for loan growth, at 6 percent to 7 percent, is about where it was in April. Analysts have expressed fear that lenders would start to show slowing loan growth.
But bankers tried to temper those fears. Bank of America generated loan growth in the mid-single digits when the economy was expanding by 2 percent, and even if current economic growth above 3 percent slowed back down to that level, it could sustain that momentum, CEO Brian Moynihan said on a conference call with analysts on Monday. "We're comfortable in the 2 percent growth economy we can continue to do that."