Updated from 2:47 p.m. EDT

Financial stocks closed sharply lower Monday, as renewed investor concerns about their capital reserves weighed on the sector.

Treasury Secretary Timothy Geithner said during a round of Sunday morning television interviews that the struggling banking sector might need even more money to help it right itself and increase lending. The comments by Geithner just affirmed that the ongoing credit crisis and recession is still weighing on banks, which are facing mounting loan losses as more customers fall behind on repaying obligations.

The NYSE Financial Sector Index responded on Monday by shedding 7.8% to 2,723 at the close, amid a wider market selloff.

The decline Monday is also unsurprising as the banking sector led markets higher during a recent run up. With investors becoming more cautious ahead of a key unemployment report at the end of the week and ahead of earnings season, bank stocks are likely to give up some of their recent gains.

Both Citigroup ( C) and Bank of America ( BAC), which have received among the most federal money and support, helped spur the three-week surge after the pair said they operated at a profit in January and February. On Monday, Citi shares fell 11.8% to $2.31 and BofA shares closed off 17.9% to $6.03.

JPMorgan Chase ( JPM) CEO Jamie Dimon's comments Friday afternoon about March being a weaker month than January and February also probably is pressuring the sector Monday. JPMorgan shares lost 9.3% to $24.85.

Goldman Sachs shares shed 7.1% to $100.46 and Morgan Stanley ( MS) stock closed down 9.1% to $22.13, as speculation circled that the two former investment banks might raise capital.

Lincoln National ( LNC) shares nosedived 38.2% after Credit Suisse downgraded the insurer to neutral from outperform. The company said in a regulatory filing on Friday that it was withdrawing its application to participate in the Federal Deposit Insurance Corp.'s Temporary Liquidity Guarantee Program, after coming to believe it would be rejected. Shares fell $3.96 to $6.41.

One of the lone bright spots amid the banking sector was Fifth Third Bancorp ( FITB), which announced earlier in the day it would sell a majority stake in its payments processing business. The Cincinnati-based regional bank will sell a 51% stake in the business to buyout firm Advent International for $561 million.

Shares of Fifth Third closed up 5.5%, to $2.48.
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