Bank stocks swung back into negative territory Wednesday as investors continued to worry about the fate of the industry this year.
The KBW Bank Index fell 5.33%, after rising 1.36% the day before.
"These stocks have such high volatility right now, so you can expect those types of moves for no rhyme or reason," said Christopher Whalen, the managing director at Institutional Risk Analytics. "It's hard to come to any meaningful valuations for bank stocks because there is no visibility on what the future holds."
Several regional bank stocks fell after Credit Suisse downgraded them to "underperform," from "neutral," largely over concerns about capital levels.
The research team wrote in a note that Regions Financial Corp. in Birmingham, Ala., and Synovus Financial Corp. in Columbus, Ga., were at risk of eliminating their dividends to preserve capital in the event of a prolonged recession. Regarding Synovus, the analysts wrote that the $34 billion-asset company may not return to profitability until the middle of next year.
Credit Suisse also downgraded the $26 billion-asset Colonial BancGroup Inc. in Montgomery, Ala., and the $65 billion-asset M&T Bank Corp. of Buffalo on concerns that the companies may need to raise more capital by selling common stock as credit conditions continue to deteriorate. The analysts also downgraded Umpqua Holdings Corp. based on the $8.3 billion-asset Portland, Ore., company's valuation.
Spokesmen for Regions, Synovus, and M&T declined to comment. Calls to Colonial and Umpqua were not returned. Regions shares were off 10.4%; Synovus, 4.1%; Colonial, 9.9%; M&T, 7%; and Umpqua, 14.8%.
JPMorgan Chase & Co. stock declined 6%. In a research note Wednesday, Sandler O'Neill & Partners LP analyst Jeff Harte wrote that he now expects Chase to report losing 10 cents a share for the fourth quarter, due to bigger writedowns. He had previously estimated that the New York company would earn 16 cents a share in the quarter.
Wilmington Trust Corp. fell 6.1% after the $12.1 billion-asset Delaware company said that its loan-loss provision for the fourth quarter would rise more than sevenfold from a year earlier, to $67 million. It also said it expects to take a one-time impairment charge on the devaluation of securities but is still calculating the amount.
Other decliners Wednesday included Bank of America Corp., off 4%; Wells Fargo & Co., 6.1%; Bank of New York Mellon Corp., 3.3%; State Street Corp., 4.6%; and City National Corp., 4.4%.
The broader markets also fell Wednesday. The Dow Jones industrial average lost 2.72%, and the Standard & Poor's 500 index, 3%.
The ADP National Employment report said that the private sector lost 693,000 jobs in December, worse than expected.