BofA shares drop on economic, European worries

The sign of a Bank of America branch is pictured in downtown Los Angeles October 8, 2010.

(Reuters) - Bank of America Corp (BAC.N) shares fell nearly 8 percent to their lowest level since March 2009 as investors worried that a slowing domestic economy and European debt woes would batter it and other banks.

Bank of America shares were off 48 cents to $5.64 in afternoon trading, rebounding slightly from earlier losses.

Rivals Citigroup Inc (C.N), Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N) were also sharply lower amid a broad industry sell-off.

"We saw this in the industry's third-quarter stock price performance, and that seems to be carrying over into the fourth quarter," said Barclays Capital analyst Jason Goldberg.

The KBW Bank Index .BKX was down 3.5 percent

Bank of America, the largest U.S. bank by assets, is shedding properties to raise capital as it tries to cope with billions of dollars in problem mortgages.

Analysts said investors are worried that the weak state of the U.S. economy will crimp profits, further impeding the bank's ability to absorb mortgage losses, and a European debt crisis could affect U.S. lenders.

"The fear trade and uncertainties will drive these shares until clarity is provided in one form or another," said Albion Financial Group analyst Jason Ware. (Reporting by Joe Rauch in Charlotte, North Carolina; editing by John Wallace)