Shares of Citigroup Inc
The sector was also hit by a report from veteran analyst Dick Bove at Rochdale Securities suggesting that in the short-term a reaction to the recent move up in the stocks may develop.
Citigroup shares slumped as low as $4.84 in early morning trading after the weekly magazine Barron's recommended investors take profits in the U.S. bank, whose shares have almost doubled in the last month.
Even banks seen as outperformers during the two-year-old financial crisis fell slightly. JPMorgan Chase & Co
There is a big question over the recent runs, said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco. Investors are concerned that news in the sector did not justify the recent run-up.
The rally may also have been helped by short sellers closing out their positions by buying back shares, he said.
Shares in other financial companies, including insurer American International Group Inc
AIG shares were down 9.7 percent at $45.30 in early trading after climbing more than 50 percent last week, while Fannie shares fell 8.3 percent to $1.87 and Freddie shares slipped 10 percent to $2.13.
The KBW Banks Index <.BKX> has climbed 7 percent since the start of August.
(Reporting by Elinor Comlay, additional reporting by Edward Krudy; editing by John Wallace and Derek Caney)