Wells Fargo cut its rating on the U.S. bank sector to marketweight on weaker-than-expected economic growth and persistently low interest rates.
The slowdown in the U.S. GDP has been further exacerbated by ongoing issues in the ailing mortgage industry and the regulatory overhang, Wells Fargo analyst Matthew Burnell wrote in a note to clients.
In June, a slew of brokerages, including Citigroup, KBW, Sanford Bernstein, BofA Merrill Lynch and JMP Securities, cut their outlook and ratings on large U.S. banks citing the low interest rate and challenging trading environment.
Wells Fargo also cut the largest U.S. bank by assets -- Bank of America
Mortgage-related costs have been high at Bank of America because of the overhang from the legacy Countrywide mortgage losses, the brokerage said.
Bank of America's purchase of mortgage company Countrywide for $4 billion in 2008 has been criticized as one of the worst deals in corporate America, as it left BofA saddled with Countrywide's mortgage liabilities.
In June, Bank of America reached an $8.5 million settlement with investors over losses in mortgage-backed securities.
The brokerage said it expects lower interest rates to persist into 2012 and cut its rating on U.S. regional bank Comerica
It added that Comerica's loan portfolio was the most sensitive to interest rates among its peers.
(Reporting by Rachel Chitra in Bangalore; Editing by Joyjeet Das)