Updated from 3:10 p.m. EDTFinancial stocks were among the worst performers of Monday's session following Bank of America's ( BAC) 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.
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) 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) 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) was dropped 12.4%. Elsewhere, American International Group ( AIG) 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.