Many Wall Street analysts reduced their ratings and estimates for Bank of America Corp.'s stock Thursday, a day after it said credit quality problems would be much worse than expected.

Indications throughout the market were that the problem is not isolated in the Charlotte, N.C., banking giant. The American Banker index of the top 225 banks rose 1.08% Thursday, and its index of the top 50 banks increased by 0.93%. The Dow Jones industrial average fell 0.43%, and the Nasdaq composite index ended the day down 1.57%.

Financial stocks generally traded positively Thursday. Bank of America gained $1, or 2.63%, to close at $39.

Lehman Brothers, A.G. Edwards & Sons Inc., Stephens Inc., and Dain Rauscher Wessels, which all previously had "buy" ratings for Bank of America, downgraded the company Thursday. Analysts at Credit Suisse First Boston and Sanford C. Bernstein & Co. cut their earnings estimates.

Joseph Morford of Dain Rauscher said he gave Bank of America a "neutral" rating after the company's written statement Wednesday confirmed deteriorating credit quality and losses from a slowdown in capital markets activity.

Dain Rauscher does not see "a compelling reason to own the stock right now other than that it's cheap, and that doesn't fit our investment thesis for owning best-of-breed companies," Mr. Morford said. "And we don't see a near-term catalyst to take shares higher."

However, Lawrence Cohn of Ryan, Beck & Co. maintained a "buy 2" rating for Bank of America. Despite the market's reaction, credit costs "are not the principal driver behind lower earnings," he wrote in a research note issued Thursday.

Higher loan-loss provisions and lower venture capital gains are the real culprits behind the problem, Mr. Cohn wrote.

Bank of America told analysts in New York Wednesday that the problem was not isolated to the fourth quarter but will still be felt next year. The company expects fourth-quarter earnings of $1.4 billion, or 85 to 90 cents a share; the Wall Street consensus had been $1.17.

Credit-quality problems are not just a thorn in the side of the U.S. banking industry. Canadian Imperial Bank of Commerce said Thursday that during the 12 months that ended Oct. 31, its general loan-loss provision rose $100 million, to $1.25 billion, a move that indicates concern over credit quality.

Canadian Imperial fell 12.5 cents Thursday, or 0.42%, to close at $29.8125.

Meanwhile, Citizens Financial Group Inc., which is owned by Royal Bank of Scotland, said Thursday that it is taking steps to ensure its already conservative lending policy can handle anything an economic slowdown might throw at it. The company said that the majority of its loan assets are in New England, a market it knows well.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.