Shares in Bank of America Corp and Citigroup Inc tumbled to new multi-year lows in premarket electronic trading on Friday on what analysts and investors said was growing fears the two longtime pillars of the U.S. financial sector could soon be nationalized.
Citigroup was down 5.2 percent in premarket trade, while Bank of America was 9.4 percent lower.
The following is reaction from industry analysts and investors:
MATT MCCALL, PRESIDENT OF PENN FINANCIAL GROUP IN
RIDGEWOOD, NEW JERSEY
There's that (nationalization) fear at the back of our mind and that's why you're see two stocks, Bank of America and Citigroup getting crushed. They are continuing to move closer to zero because of the fear. Maybe there's only a 2 percent chance of nationalization, but at this point nobody knows, you can't put anything past the government.
There's that fear that we nationalize banks and this market gets killed.
MICHAEL HOLLAND, FOUNDER OF HOLLAND & CO, OVERSEES MORE
THAN $4 BILLION, NEW YORK
It's a clear sign that the markets are expecting a high probability of them (Citigroup and Bank of America) being nationalized.
The clear expectation is that shareholders would effectively be wiped out.
KEITH DAVIS, RESEARCH ANALYST, FARR, MILLER & WASHINGTON IN
There's just so much uncertainty about what's going to happen to these two companies.
No one wants to get involved with these banks.
Right now people are looking at the worst-case scenario which is either a complete nationalization or Bank of America and Citi having to raise so much common equity that they dilute shareholders. It seems to me either one is a possibility.
(Reporting by Elinor Comlay, Juan Lagorio and Ellis Mnyandu)