Investors Fall Out of Love With Banks

Even well-managed regional banks no longer darlings
By Jim O'Neill,  Newser User
Posted Jul 16, 2008 7:39 AM CDT
Traders work on the floor at the New York Stock Exchange in New York, Monday.   (AP Photo/Seth Wenig)
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(Newser) – With the nation's banks under pressure from bad loans, and sources of credit scarce, bank customers aren't panicking, the New York Times notes, but  investors are, fleeing an industry much more accustomed to being a Wall Street darling. Bank shares continued their downward spiral yesterday, with the S&P Regional Bank Index down 4% on top of Monday’s 11% drop.

The reversal is particularly dramatic for well-managed regional banks, which rode the mortgage boom to handsome profits, without taking the huge risks that have cost the big banks billions. Investors who were willing to pay premiums for what looked like promising takeover targets a year ago are now hammering them. “The whole allure of regional banks has gone out of fashion,” an analyst tells the Times. “They used to have the best perfume in the business. Now, they have an odor.”