Overnight in the US: BoA sheds 20% as financials routed

Bank of America’s share price fell by 20% as US financials were routed in Monday trading over growth fears and S&P’s downgrade of the US credit rating.

Publically-traded banks and other financials slumped on the day government lenders Fannie Mae and Freddie Mac had their credit ratings cut to AA+ by S&P, in line with Friday's move to downgrade the US itself.

Bank of America closed down 20.1% at $6.51 amid a wider market sell-off which saw the S&P 500 tumble 6.66% to 1,119.

Citigroup fell by 16.4% to $27.95, Morgan Stanley fell 14.5% to $17.12 and JPMorgan Chase dropped 9.4% to 34.06. Goldman Sachs was down 6% at $117.66.

Bailed-out US insurer AIG filed a lawsuit against BofA yesterday over $10bn worth of losses on mortgage-backed investments, alleging a "massive" mortgage fraud.

BofA has now lost 34% of its value since 1 August alone, wiping $33bn off its share price, and is 50% down since the start of the year.

The drop has raised fears the bank will need to raise more capital to boost its balance sheet. BofA, the largest bank in the US, said yesterday that it had no plans to make such a move.

AIG also saw a steep decline in its share price yesterday as insurers were unable to escape the suffering, falling 10% to $22.58. MetLife shares stood 9.9% lower at $32.74 by the close, while mortgage and life insurer Genworth Financial plummeted 17% to $5.63.