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NEW YORK - SHARES of JPMorgan Chase, Citigroup and Bank of America tumbled to multi-year lows on Wednesday on expectations that deteriorating credit conditions and a contracting economy will weigh heavily on the three largest US banks.
JPMorgan shares fell as much as 9.6 per cent to their lowest level in 5-1/2 years, predating the arrival of Mr Jamie Dimon as chief executive. Citigroup dropped as much as 14.1 per cent to a 13-year low, and was surpassed as the fourth-largest bank US by market value by US Bancorp, which has one-eighth as much in assets. Bank of America shares fell as much as 10.9 per cent to an 11-1/2-year low.
The three banks are in the Dow Jones industrial average, and even before Wednesday had lost more than US$450 billion (S$688.9 billion) of market value from recent highs - Bank of America in November 2006, Citigroup the next month, and JPMorgan in May 2007.
Investor worries swelled after Credit Suisse analysts said two big, new commercial loans were near default. That fanned fears that credit deterioration that has already saturated the residential mortgage market and worsened in credit cards was heading to a major new area, commercial real estate.
Meanwhile, new government data showed that consumer prices dropped in October at the fastest pace ever, while housing starts that month were the fewest on record. The data showed how fast the already troubled US economy is weakening.
'Part of the dread is about just how bad the financials have been doing,' said Mr Alan Lancz, president of Alan B. Lancz & Associates, a Toledo, Ohio investment adviser. 'Even in those that are supposed to be the leaders - JPMorgan, Wells Fargo, Bank of America - there's just tremendous, continued declines.'
Citigroup on Wednesday also said it agreed to buy US$17.4 billion of assets remaining in a series of funds known as structured investment vehicles. Such vehicles were among the earlier major classes of investments to implode in the global credit crunch that began last year. On Monday, Citigroup announced 52,000 job cuts.
In afternoon trading on the New York Stock Exchange, JPMorgan shares were down US$2.63, or 8.2 per cent, at US$29.51, after earlier falling to US$29.06; Citigroup was down US$1.05, or 12.6 per cent, to US$7.31, after earlier falling to US$7.18; and Bank of America was off US$1.60, or 10.5 per cent, to US$13.59, after earlier dropping to US$13.54.
Wells Fargo, the second-largest US bank by market value after JPMorgan, was down US$1.59, or 5.9 per cent, to US$25.61 in afternoon trading. Wachovia, which Wells Fargo is buying, fell 34 cents, or 6.5 per cent, to US$4.92. Merrill Lynch, which Bank of America is buying, fell US$1.05, or 9.2 per cent, to US$10.35. -- REUTERS
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