Colonial BancGroup Inc. shares plunged 12.4% Wednesday on speculation that the company needs to raise capital.
Kevin Fitzsimmons, a Sandler O'Neill & Partners LP analyst, cut his earnings estimates for the company by 50 cents for this year, to break even, and by 45 cents for next year, to 20 cents a share, citing the expectation of steep loan losses.
At least two other analysts have lowered their estimates since late last month.
Robert Patten, an analyst at Regions Financial Corp.'s Morgan Keegan & Co., said it appeared investors engaged in aggressive short-trading Wednesday on speculation that Colonial would seek to raise capital.
But Mr. Patten said that he had spoken with Robert Lowder, its chairman and chief executive, who said the company does not need a cash injection.
"I think it is easy to be negative today," Mr. Patten said. "It takes real work to be positive."
Merrie Tolbert, a spokeswoman for Colonial, said, "The rumors about us needing to raise capital are completely incorrect. Our capital is more than adequate to weather the current credit cycle."
