NEW YORK ( TheStreet) -- Regional bank stocks sold off sharply Monday, while shares of larger banks were down by a smaller margin.
The trend was visible in the SPDR KBW Regional Banking ETF (KRE), which was down by 3.88% to $21.79 shortly before Monday's close, compared to a drop of 1.64% for the SPDR KBW Bank ETF (KBE), which focuses on the largest U.S. banks.
Frank Schiraldi, analyst at Sandler O'Neill, attributes the phenomenon to the lower-than-expected price M&T Bank Corp. (MTB - Get Report)is paying for Wilmington Trust (WL), in a deal announced Monday.
The $351 million M&T will pay is roughly equal to Wilmington's tangible book value. The low price sent shares of Wilmington down 42.05% to $4.12. M&T, meanwhile, saw its shares rise 3.4% to $77.29.In a presentation Monday, M&T described "through the cycle" losses of 40% on Wilmington's portfolio of construction loans. Schiraldi says those estimates caused investors to put pressure on shares of bank stocks like Fulton Financial Corp. (FULT - Get Report) and Susquehanna Bancshares (SUSQ) which have construction loan portfolios in the same region. Fulton's shares were down 5.67%, to $8.81, and Susquehanna's were down 6.42% to $7.40. "People try and look at who might have exposure in the Maryland/Virginia/Delaware area and maybe look to hit those guys today just because of the marks in the presentation M&T put out," Schiraldi says. The largest banks, meanwhile, did not fare quite so badly. Shares of Wells Fargo (WFC - Get Report) were down by 1.63% to $25.64, Bank of America (BAC - Get Report)shares dropped 0.43% to $11.40 and Citigroup (C - Get Report) fell 1.44% to $4.11. -- Written by Dan Freed in New York.