Bank stocks fell sharply Monday on concerns that the economic recovery has stalled and that the largest banks could be required to hold more capital under new international capital standards.
At midday, five bank stocks — Bank of America Corp., Citigroup Inc., JPMorgan Chase & Co., Regions Financial Corp. and Wells Fargo & Co. — were among the 10 most active stocks traded on the New York Stock Exchange, and all five ended the day on a low note.
Hardest hit was Regions, which fell nearly 5%, to close at $6.05, followed by Citi, which was down 4.5%, to $38.07, and Bank of America, which briefly hit a 52-week low before closing at $10.83, down 4% from Friday's close. Wells' shares fell 2.2%, to $26.26, after Rochdale Securities analyst Richard Bove cut his recommendation on the stock from hold to sell, while JPMorgan Chase's shares declined by 2.5%, to $40.53.
Analysts attributed to the decline in bank stocks to discouraging reports on unemployment and home prices, as well as Federal Reserve Gov. Daniel Tarullo's comments last week that banking regulators could levy a capital surcharge on banks that pose the greatest risk to the financial system should they fail.
So far, the size of the surcharge has not been determined, but the Basel Committee on Banking Supervision is expected to release its proposal on the issue in the next few months. The Fed is also working on its own proposal in which it would require all banks with more than $50 billion of assets to hold more capital based on their perceived threat to the financial system.
For the day, the KBW Bank Index was down more than 2%.
Among the top performers of the day was First Financial Bancorp, whose shares rose more than 4%, to $15.66, after analyst Bryce Rowe at R.W. Baird & Co. upgraded the stock from neutral to outperform and raised his price target from $19 to $21. Rowe upgraded the stock on Friday's news that Cincinnati-based First Financial was buying 16 Ohio branches from Liberty Savings Bank.
