NEW YORK — As the banking sector continues to get hammered, some of the biggest and what were thought to be strongest banks — including Wells Fargo & Co. and JPMorgan Chase & Co. — are getting badly hit.
Shares of Wells Fargo tumbled as much as 19% Thursday to a 13-year low. Moody's Investors Service, in warning late Wednesday that it might downgrade Wells Fargo's credit ratings, focused on the continuing costs from the bank's acquisition last year of Wachovia Corp.
JPMorgan slid 11% to its lowest point since October 2002, and Citigroup Inc. dropped below $1, falling as much as 14% to an all-time low, before recovering some of its losses.
The only big bank that escaped hitting its 52-week low Thursday was Bank of America Inc., though its shares still fell as much as 13% to $3.12. The stock is 28% above the low of $2.53 it hit Feb. 20.
"As an investor, it's hard enough owning any stocks, let alone bank stocks, which are taking the brunt of this recession head on," Raymond James analyst Anthony Polini told Dow Jones Newswires. "The financials are just going to take it on the chin until we figure out that the economy has hit bottom."
The declines come as recent warnings from ratings agencies on several of the big banks have ramped up concerns across the entire banking sector at a time when investors have become increasingly afraid of going near any financial stock.
The KBW Bank Index was down 8.7% in recent trading, while the KBW Regional Banking Index slumped 7.5%.
Wells Fargo said it didn't need government help when it scooped up Wachovia just months ago. Now that acquisition is weighing heavily on the bank. Moody's said Wednesday that Wells Fargo didn't raise enough equity for its purchase of Wachovia in light of the size and poor quality of Wachovia's assets. Record provisions and merger-related expenses will hit Wells Fargo on assets that were not marked down at the end of 2008, the ratings agency said.
S&P financials analyst Stuart Plesser also warned Wednesday that ratings agency expects Wells Fargo will cut its dividend in the coming months, and will also need to raise additional capital to boost its tangible capital ratio.
Wells Fargo didn't immediately respond to a request for comment.
Moody's also said it's considering downgrading its credit rating on Bank of America and changed its outlook for JPMorgan to negative.
Moody's said rising credit costs could hurt capital ratios at Bank of America. The agency called their ratios "comparatively low" and said there is further risk of high loan-loss provisions in 2009 damaging those ratios.
As for JPMorgan, Moody's said its outlook change reflects the rising credit costs for the next four to six quarters, which would likely keep the bank's capital generation "modest at best."
JPMorgan and Bank of America declined to comment.
U.S. Bancorp was also among the bigger banks resetting their 52-week lows, as it dropped as much as 19% to $8.96, its lowest point since September 1996. On Wednesday, it became the latest strong U.S. bank to reduce its dividend in an effort to preserve cash, slashing its dividend 88% to 5 cents a share.
In a Thursday note to clients, FBR Capital Markets analyst David Rochester called the dividend cut a "smart move," though he noted the stock's valuation is still at risk.
Rochester, who maintained his underperform rating on U.S. Bancorp, warned the economic downturn "will ultimately drive further asset deflation, tighter credit, and higher unemployment, contributing to material credit deterioration, especially within USB's commercial and industrial and consumer portfolios."
Regional banks, meanwhile, followed the downhill spiral of their larger counterparts. Zions Bancorp, PNC Financial Services Group Inc. and M&T Bank Corp. are on the long list of regional banks that hit new 52-week lows Thursday. The three were all listed in a Thursday note by UBS analyst Matthew O'Connor as likely to see profits badly hit if the Federal Deposit Insurance Corp.'s proposal for a one-time emergency deposit insurance premium goes through.