Bank stocks fell Tuesday as positive vibes from big banks getting out of the Troubled Asset Relief Program gave way to renewed concerns about troubled credit quality among regionals.
The KBW bank index fell 2.9%. The Dow Jones industrial average fell 0.5% and the Standard & Poor's 500 fell 0.6%.
The research team at UBS AG led by Erika Penala stoked concerns with a cautious 2010 outlook for midsize banking companies. "Our fundamental view is still negative," Penala wrote in a note to UBS clients, warning that loan losses will not peak until 2011 at the earliest. (Many regional banking companies also remain participants in Tarp.)
Penala's team assigned "sell" ratings to five banking companies over worries that they might have to sell common stock to raise additional capital: City National Corp., First Horizon National Corp., Marshall & Ilsley Corp., Synovus Financial Corp. and Zions Bancorp. UBS said those banks may also suffer from sluggish balance sheet growth.
City National shares fell 0.4%. First Horizon slid 2.6% and Synovus shares lost 6.3%. M&I shares fell 6.8% while Zions shares fell 5.2%.
Associated Banc-Corp shares rose 1.8% after it landed the only "buy" rating from UBS.
Wells Fargo & Co. shares edged up 0.7% after the San Francisco company became the last big bank to move ahead with a plan to exit Tarp. Wells sold $10.65 billion in common stock Tuesday as it plans to repay $25 billion to the government.
Capital One Financial Corp. shares fell 2.3%. The company said Tuesday that more of its U.S. credit card borrowers fell behind on their payments last month. Capital One said in a filing with the Securities and Exchange Commission that its annual net chargeoff rate rose to 9.6% in November compared to 9.04% a month earlier. The rate for loans at least 30 days delinquent rose 15 basis points, to 5.87%.
Amcore Financial Inc. shares jumped 11.7% after the Rockford, Ill., company said it had sold four Wisconsin branches and $135 million in loans in an effort to boost capital levels. It said the sales would "significantly improve" capital beyond an expected $25 million to $30 million federal income tax refund.
Other gainers included Bank of Granite Corp. in Granite Falls, N.C., 1.9%; BancorpSouth Inc. in Tupelo, Miss., 1.1%; and First Source Corp. in South Bend, Ind., 0.9%.
Decliners included SunTrust Banks Inc. (5.85), Regions Financial Corp. (4.3%) and Citigroup Inc. (3.8%).