Monday's Financial Winners & Losers

Wachovia(WB Quote) was a drag on financial stocks Monday, after the nation's fourth largest bank swung to a first-quarter loss and said it was raising $7 billion.

The Charlotte N.C.- based bank said it lost $393 million, or 20 cents a share, vs. a profit of $3.2 billion, or $1.20 a share in the year-ago period. Wachovia also said it will slash its dividend, cut 500 jobs in its corporate and investment bank and raise $7 billion in a sale of common and preferred stock.

The stock dropped 8.1% to $25.55, while the NYSE Financial Sector Index declined 103.08 to 7,221.94.

The news from Wachovia sent jitters among other commercial banks, which dropped almost across the board. National City(NCC Quote) was down 89 cents to $7.56, a loss of 10.5%; Huntington Bancshares (HBAN Quote)HBAN slid 9.3% to $8.99; and First Horizon (FHN Quote) tumbled 11.1% to $11.65.

Interactive Brokers reported that options activity was heavy in several other regional banks, including southern bank chains Colonial Bancgroup(CNB Quote) and Synovus Financial(SNV Quote), which were lost 6.1% to $8.82 and 5.2% to $10.26, respectively, and western bank Zions Bancorp(ZION Quote), which dropped 6.6% to $41.51.

But it wasn't all bad news, as some deal making in the financial stocks pushed a handful of names higher. Struggling California lender Fremont General(FMT Quote) agreed to sell its bank to CapitalSource(CSE Quote) for $170 million. CapitalSource will also assume $5.6 billion in deposits held by Fremont Investment & Loan and take over 22 retail bank branches.

Fremont shares, which lost 93% of their value over a year in which the company has been beaten up by the subprime meltdown, managed to gain 20% Monday, gaining 9 cents to 54 cents. CapitalSource jumped 13.7% to $11.92.

In other deal news, Clayton Holdings(CLAY Quote) soared 18.7% to $5.72 after news that an affiliate of private equity firm Greenfield Partners would be acquiring the mortgage debt consultant for $132 million. A Piper Jaffray analyst downgraded the stock to neutral from buy and lowered the price target to $6 from $8.

The same Piper Jaffray analyst had positive things to say about Ocwen Financial Group(OCN Quote), sending the stock surging 10.3% to $4.07. The analyst believes that the growth in delinquencies has slowed and that the trend should continue through the year. Ocwen provides outsourcing services to owners of residential loans.