Updated from 1:04 p.m. EDT

Financial stocks took it on the chin Monday, after a noted banking analyst wrote in a note that loan losses at large-cap banks could exceed levels in the Great Depression.

Mike Mayo, who recently moved from Deutsche Bank to CLSA Asia-Pacific Markets, reinitiated coverage of the U.S. bank sector with an underperform, giving bearish ratings to 11 companies. He says the government's efforts to curtail the financial crisis may not help as much as expected.

The NYSE Financial Sector Index fell 2.4% to 3,127, outpacing losses in the Dow Jones Industrial Average, which was off fractionally.

Citigroup ( C) shares closed down 4.6% to $2.72. The bank earlier permanently named Mike Corbat as the CEO of Citi Holdings, its "bad bank" entity.

Bank of America ( BAC) shed 1.6% to $7.48. Mayo's note was counterbalanced by a bullish note on the stock from Rochdale Securities analyst Dick Bove, who expects it to return to "all-time highs."

JPMorgan Chase ( JPM) lost 3.7% to $28.20 and Wells Fargo ( WFC) was off 6.7% to $15.25.

Morgan Stanley ( MS) shares fell 3.1% to $23.31 and Goldman Sachs ( GS) shed 2.3% to $116.65.

On the flip side, First Marblehead ( FMD) shares rose 44.2% to $2.12 after it said it sold its ownership interest in NC Residuals Owners Trust, which owns the residual interests in all 15 of the National Collegiate Student Loan Trusts First Marblehead has facilitated.

This article was written by a staff member of TheStreet.com.

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