NEW YORK (Reuters) - Shares of regional banks sank on Monday, with National City Corp (NCC.N: Quote, Profile, Research, Stock Buzz) down 45 percent, as the sector suffered what analysts called a deepening crisis of confidence. Investors wondered which banks might need a merger partner in order to survive amid the upheaval in the U.S. financial system. Sovereign Bancorp (SOV.N: Quote, Profile, Research, Stock Buzz) fell 32 percent, Fifth Third Bancorp (FITB.O: Quote, Profile, Research, Stock Buzz) dropped 25 percent, FirstFed Financial Corp (FED.N: Quote, Profile, Research, Stock Buzz) gave up 20 percent, and KeyCorp (KEY.N: Quote, Profile, Research, Stock Buzz) slumped 10 percent. The closely watched S&P Financial index fell 4.4 percent. "There are a number of regional banks which may need help, either because of the weakening mortgage market or simply because of the weakening economy," said Michael Sheldon, chief market strategist of RDM Financial Group.
"I think it's absolutely a crisis of confidence ... but the larger issue is simply a paralysis of the economy or lack of confidence in financial institutions," he said.
James Ellman, portfolio manager of hedge fund Seacliff Capital, said, "There will be a large number of smaller banks that will likely have significant problems across the (U.S.) Southeast and Southwest.
"Many of those are small enough that the FDIC (Federal Deposit Insurance Corp) can actually seize them and sell them off ... they do not create a risk to the entire system. That is something different than Wachovia and WaMu."
Washington Mutual Inc WAMUQ.PK was shut down by the government last week and its assets sold to JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz). Earlier Monday, Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) said it would buy the banking operations of Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) -- a deal brokered by the government to ensure "financial and economic stability," Federal Reserve Chairman Ben Bernanke said in a statement.
"There are a number of regional banks which may need help, either because of the weakening mortgage market or simply because of the weakening economy," said Michael Sheldon, chief market strategist of RDM Financial Group.
"I think it's absolutely a crisis of confidence ... but the larger issue is simply a paralysis of the economy or lack of confidence in financial institutions," he said.
James Ellman, portfolio manager of hedge fund Seacliff Capital, said, "There will be a large number of smaller banks that will likely have significant problems across the (U.S.) Southeast and Southwest.
"Many of those are small enough that the FDIC (Federal Deposit Insurance Corp) can actually seize them and sell them off ... they do not create a risk to the entire system. That is something different than Wachovia and WaMu."
Washington Mutual Inc WAMUQ.PK was shut down by the government last week and its assets sold to JPMorgan Chase & Co (JPM.N: Quote, Profile, Research, Stock Buzz). Earlier Monday, Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz) said it would buy the banking operations of Wachovia Corp (WB.N: Quote, Profile, Research, Stock Buzz) -- a deal brokered by the government to ensure "financial and economic stability," Federal Reserve Chairman Ben Bernanke said in a statement.
Source : Reuters
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