U.S. bank shares sink

By Juan Lagorio

NEW YORK (Reuters) - U.S. bank shares sank on Tuesday, with Citigroup (C.N) and Bank of America (BAC.N) hitting their lowest levels since the early 1990s, as a series of analysts cut their forecasts for financial firms for 2009 as the recession deepens and credit losses soar.

Confidence in the banking sector was also rattled as State Street Corp (STT.N) said it could need to raise capital, a day after Royal Bank of Scotland Group (RBS.L) posted the biggest loss in corporate history.

The rout was widespread, with regional banks like PNC Financial Services Group (PNC.N) getting hit hard and even relative islands of safety like J.P. Morgan Chase (JPM.N) getting hammered on concern about a worsening U.S. economy and banks' ability to withstand more credit losses without government help that could dilute shareholder interests.

"The market doesn't trust that banks have properly marked their balance sheets and their loan portfolios. The sense is there are further marks to come, that tangible book is not as it is stated today. We're looking for bottom; we'll find a bottom," said Robert Patten, a bank analyst for Morgan Keegan.

The KBW Bank Index .BKX plummeted 19.71 percent to a 14-year low on Tuesday. The index has fallen almost 43 percent this month.

Four analysts increased their 2009 loss estimates for Citigroup due to higher bad loans, sending the shares of the third-largest U.S. bank below the level they reached in November, when the government rescued it with an injection of $20 billion (14 billion pounds) and a backstop on toxic assets.

In addition, Bank of America Corp stock fell to its lowest level since November 1990, as analysts said the U.S. largest bank will remain under pressure until it rebuilds its capital, four days after posting its first quarterly loss in 17 years.

Citigroup shares fell 20 percent, hitting their lowest level in 18 years, while Bank of America stock sank 29 percent.