NEW YORK (AFP) –
Citigroup and Bank of America shares plunged again Friday amid market rumors that the government will nationalize the two big banks, which already have benefited from massive federal bailouts.
Citigroup tumbled 20.72 percent to 1.99 dollars, an 18-year low, at 1623 GMT and Bank of America (BofA) shed 16.54 percent at 3.28 dollars, its lowest level in 24 years.
Other banking shares plummeted in their wake, with Wells Fargo down 18.57 percent at 9.78 dollars and JPMorgan Chase off 6.50 percent at 19.26 dollars.
"Two major banks are collapsing in the stock market," said Gregori Volokhin, a strategy chief at Meeschaert New York. "The two banks are implicitly nationalized, which is what is rocking investors in the financial sector."
The US government has injected 45 billion dollars into both Citi and BofA to prevent their collapse in exchange for preferred stocks, without voting rights.
Given the battering their shares have taken, the capitalization of Citigroup is hardly more than 10 billion dollars, while that of BofA is 17 billion dollars, well below the federal government's holdings.
For Volokhin, it is "creeping nationalization."
"It's necessary to have clarity on the situation," he said. "And for things to be clear, a temporary nationalization is in the cards, which will allow, when things improve, the government to exit without having lost enormous sums," he said.
analyst Patrick O'Hare noted "angst over the specter of mega banks Citigroup and Bank of America possibly being nationalized in the foreseeable future."
"Whether that actually happens remains to be seen, but their stocks are acting as if it is a distinct possibility," he said.