Sector Snap: Regional Banks Slump After Downgrades

NEW YORK (AP) — Shares of regional banks tumbled Monday alongside the broader market as downgrades on a handful of companies underscored concerns that higher loan losses will hamper bank earnings over the next several quarters.

The KBW Bank index, which tracks 24 of the nation's largest banks, fell 2.8 percent in afternoon trading. The overall market was down, too, in part due to a strengthening dollar.

In research notes compiled over the weekend, Rochdale Securities bank analyst Richard Bove said third-quarter results suggest rising loan losses will continue to eat into regional banks' earnings over the next several quarters, preventing many from showing a profit until 2011. Based on future earnings potential, current stock prices appear to be overheated, he said.

Bove lowered his ratings on Fifth Third Bancorp and SunTrust Banks Inc. to "Sell" from "Neutral." He also cut his rating on US Bancorp to "Neutral" from "Buy."

Fifth Third shares dropped 61 cents, or 5.9 percent, to $9.73 in afternoon trading, while SunTrust fell 97 cents, or 4.6 percent, to $20.02. US Bancorp lost 70 cents, or 2.8 percent, to $24.25.