Like a pinstripe-clad Roger Daltrey, bank investors were wondering
who's next Wednesday after two big banks reported a troubling spike in shaky loans.
First Union ( FTU) and Bank of America ( BAC) shook up the financial sector with cautionary words Tuesday evening about their
exposure to risky loans. Given that worries about deteriorating credit quality have hamstrung bank stocks for months, it didn't take long for the sector to wince. First Union shed more than 8% Tuesday; Wednesday, Bank of America dropped 9%, leading a 4% slide in the S&P Bank Index. The bad news sent investors scouring their portfolios for lenders whose loan-loss and nonperforming-asset trends could point to emerging problems. Using those and other guidelines, three analysts shared their thoughts on which bank stocks might be vulnerable. exposures to health care, textiles, the theater industry and agribusiness," adds Thompson. SunTrust dropped 4.2% and Wachovia 6.8% Wednesday as regional bank stocks took a heavy drubbing. profit warning, investors' anxiety over loan defaults has only risen as evidence of a nationwide economic slowdown continues to filter in. Kathy Shanley, fixed-income analyst with Gimme Credit in Willamette, Ill., says she'd avoid Comerica ( CMA), whose stock fell two weeks ago on the announcement of its plan to buy California-based Imperial Bancorp ( IMP), whose credit-quality track record is mixed. Shanley thinks Imperial's exposure to residential tract construction could be worth watching, as could the bank's $400 million emerging growth portfolio. Brock Vandervliet, banks analyst at Lehman Brothers, has assessed exposure to syndicated loans, which is particularly timely considering the big hit First Union and Bank of America will take on their syndicated deal with troubled Sunbeam ( SOC). (A syndicated loan is one shared by three or more institutions.) Vandervliet said the risks of exposure to syndicated credits are well established, and recent events "are just confirmation that investor sensitivity should remain pretty high." Accordingly, he says Hibernia ( HIB), Pacific Century ( BOH) and UnionBanCal ( UB) will all have "some rough sledding in the near term." Of those names, UnionBanCal's exposure to syndicated credits is greatest. The banks' shares all fell fractionally Wednesday.