Bank stocks slipped again on Wednesday, wrapping up one of the worst quarters in memory for the sector.
In the three months from July through September, bank stocks gave up solid gains posted in the first two quarters, and then fell further. The Standard & Poor's bank index has now lost 12% for the year, and the Nasdaq index of smaller banks is down 22%.
"It's been a very difficult quarter for banks from a stock performance standpoint," said James Ackor, equities analyst at Tucker Anthony Inc.
Shares proved especially vulnerable to "the implosion of various overseas economies and continued fear that the U.S. will be dragged into a recession in 1999," Mr. Ackor said.
On Wednesday, investors continued to shun bank shares, concluding that a 25-basis-point rate cut by the Federal Reserve was not deep enough to offset the economic risks.
On Wednesday the Dow Jones industrial average lost 237.90 points, or 2.94%, and the S&P 500 shed 32.01 points, or 3.05%. For the third quarter, the Dow was down 11%, the S&P 500 lost 9%, and the Nasdaq dropped 10%.
Bankers Trust was among the hardest hit. Its shares dived past its previous 52-week low of $60.125, to $59-a $1.8125 decline for the day. The bank said its hedge fund positions are "100% collateralized by cash and securities," but investors were skeptical. Analysts also said the bank's trading business may have fared poorly.
Hedge fund and trading worries also continued swirling around other large institutions. BankAmerica Corp. dropped $2.0625, to $60.1875; Chase Manhattan Corp. was shed $1.50, to $43.50; Citicorp was off $4.8125, to $92.9375; and J.P. Morgan declined $3.4375, to $84.625.
Among regionals, First Union lost $1.8125, to $51.1875; Fleet Financial Group was off $1.9375, to $73.4375; and Mellon Bank Corp. shed $2.0625, to $55.0625.
Thrifts, whose mortgage operations are especially rate-sensitive, were also hit. H.F. Ahmanson & Co. lost $4.625, to $55.50; Dime Bancorp fell $1, to $25.3125; and Washington Mutual fell $2.25, to $33.75.
Among the handful of gainers, Unionbancal Corp., San Francisco, was up more than $3 at the opening bell on renewed speculation of a buyout by U.S. Bancorp., Minneapolis. While neither company indicated a sale was in the offing, investors bet that the worsening economic climate in Asia might compel Unionbancal's Japanese owners to sell as a way of shoring up operations at home. Shares of Unionbancal closed at $86.875, up $1.125
Shares of U.S. Bancorp didn't open for 40 minutes after the bell, reacting to a flood of sell orders from arbitragers who bet that shares of an acquiring company will decline. The stock traded down more than $2 in its first tick, and closed the day at $35.625, off 75 cents.
Shares of PNC Bank Corp. lost $1.875, to $45, amid indications the company will boost its amount of outstanding stock. A regulatory filing on Wednesday showed PNC was moving ahead with plans to register four million shares in connection with its planned purchase, for cash and stock, of Hilliard-Lyons Inc.
Looking toward the final quarter of the year, some stock watchers are predicting a respite for stocks, especially shares of banks and thrifts that produce good third-quarter earnings.
"Barring a major disaster in Japan or Latin America, we're likely to see some stability over the short term," Mr. Ackor said.