Financial Winners & Losers: BofA

Bank of America pressured the financial sector after signs of credit deterioration in the bank's first-quarter earnings report spooked investors.
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Updated from 3:10 p.m. EDT

Financial stocks were among the worst performers of Monday's session following

Bank of America's

(BAC) - Get Report

first-quarter earnings report, as credit deterioration remains a concern for U.S. banks.

Bank of America

reported a surprise first-quarter profit of $2.8 billion, or 44 cents, coming in well ahead of Wall Street's expectations.

However, BofA said its provision for future credit losses jumped 57% to $13.4 billion, as nonperforming assets climbed to $25.7 billion, or 2.65% of the bank's book, from $18.2 billion, or 1.96% at the end of last year.

Bank of America shares dropped 24.3% to close at $8.02 on Monday. Still, the stock is up 60% over the last three months and more than 100% since the beginning of March.

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Other bank stocks also gave back recent gains.

Citigroup

(C) - Get Report

slid 19.5%,

Wells Fargo

(WFC) - Get Report

closed down 16.1% and

JPMorgan Chase

(JPM) - Get Report

shed 10.7%.

Citigroup's loss was exacerbated by a research note from Goldman Sachs that said credit losses, which the firm views as "critical in drawing a line in stabilizing Citi's capital base," continue to grow at a rapid rate. The Goldman analyst said that while Citigroup's headline number was positive when it reported earnings Friday, "we estimate that the underlying earnings were a loss of

38 cents."

It appears that banks will continue to be a hot topic this week after

The New York Times

reported that the White House and Treasury Department are considering converting existing government loans to the nation's 19 largest banks into common stock. The shift comes as U.S. officials are looking to stretch what is left of the $700 billion in TARP funds without approaching Congress for more money.

One criticism is that the conversion to common stock would make the U.S. one of the biggest, if not the single largest, shareholder of these banks, what some consider a passive approach to nationalization.

Among other analyst moves,

Capital One

(COF) - Get Report

was downgraded at Goldman Sachs to neutral from buy due to likely extended weakness in credit card into 2010. The firm also lowered its price target to $17 from $18. Capital One plummeted 25% to $13.38.

Fellow credit card issuer

American Express

(AXP) - Get Report

was also under pressure after word that further regulation of the credit card industry could come. During an interview Sunday on NBC's "Meet The Press," presidential economic adviser Larry Summers indicated the White House will focus next on credit card abuses, including "extraordinarily high rates."

Shares of American Express finished with a loss of 13% to $18.98.

Discover Financial

(DFS) - Get Report

was dropped 12.4%.

Elsewhere,

American International Group

(AIG) - Get Report

also finished lower after a regulatory filing with the

Securities and Exchange Commission

showed that the insurer sold preferred stock and issued warrants to the U.S. government in exchange for nearly $30 billion.

As part of the deal, AIG must avoid filing for bankruptcy and the government must own more than 50% of the insurance giant. AIG shares shed 20.4% to $1.29.