Worries over loan losses send bank stocks lower

Banks are still losing money and will be for some time.

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.

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 a 24-year low of $4.60.

Other regional bank shares also plummeted. SunTrust Banks Inc. lost $4.87, or 24 percent, to $15.07; Fifth Third Bancorp shed $1.21, or 22 percent, to $4.22; and Marshall & Ilsley Corp. fell $1.62, or 21 percent, to $6.

State Street Corp. shares, meanwhile, dove 59 percent 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 to $14.89.

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, closed down 20 percent 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 dropped $2.08, or 29 percent, to $5.10.

The company faced additional pressure after Stifel, Nicolaus & Co. analyst Christopher Mutascio downgraded the stock to “Hold” from “Buy.” Shares have fallen more than 50 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.