NEW YORK (Reuters) - Citigroup Inc (C.N) shares fell to almost 18-year lows on Thursday, with Bank of America Corp (BAC.N) stock also plunging, amid renewed fears that growing losses could lead to government control of troubled U.S. banks, wiping out shareholders.
In addition, insurance companies’ stocks plummeted — led by Hartford Financial Services Group (HIG.N) — as declining stock and bond market values added to concerns about weakening investment portfolios and capital positions.
“When you talk about nationalization you hear the names Citi and Bank of America as the top two names burning out,” said Walter Todd, a portfolio manager at Greenwood Capital Associates, which holds shares of Bank of America.
Bank of America dropped 7 percent to $4.25 on the New York Stock Exchange at mid-afternoon, while Citigroup fell 10 percent to $2.62 after touching $2.50 — its lowest level since July 1991.
The KBW Financial index .BKX fell 3.59 percent to 22.58 after touching a 17-year low.
Last month, Bank of America Corp (BAC.N) posted its first quarterly loss in 17 years, after mounting losses at recently acquired Merrill Lynch. Citigroup has lost $28.5 billion in the last 15 months, hammered by bad debts and toxic assets.
Each bank received $45 billion in government aid in recent months and a backstop on toxic assets-related losses, more than their current market value.
The U.S. Treasury is expected in coming weeks to subject up to 25 banks with assets exceeding $100 billion each to “stress tests” to decide which banks need additional capital.
And support for nationalizing troubled banks seems to be growing. Republican Senator Lindsey Graham has said nationalization could be an option, while former Federal Reserve Chairman Alan Greenspan said government intervention could be the least bad alternative left for policymakers.
“People are afraid of the government at this point. The market is selling off on the lack of information. Tell us something, please,” said Anton Schutz, president of Mendon Capital.
Investors’ fears also hit insurers stocks, with the KBW Insurance index .KIX down 3.65 percent to 58.05.
Insurance companies have massive investment portfolios that fund their ultimate liabilities. As markets were hurt on Thursday, investors grew concerned that insurers’ investment portfolios would be hit.
“Today seems to be ‘Sell Everything Financial,’” Schutz said.
American International Group’s (AIG.N) shares plummeted 16.4 percent to 61 cents, and Hartford Financial stock was down 19.3 percent at $8.26.
Prudential Financial (PRU.N) fell 15.2 percent to $19.17 as Fitch Ratings downgraded the insurers’ senior unsecured debt rating to “BBB” from “A-“ due to its exposure to the volatile credit and investment markets conditions.
Reporting by Juan Lagorio, editing by Matthew Lewis, Richard Chang