NEW YORK - Bank of America sold US$10 billion (S$14.7 billion) of shares on Tuesday after its stock price suffered its biggest ever one-day loss, and the rest of the financial sector fell on concerns that other banks might need to raise capital as they struggle with the weak economy.

Bank of America shares fell 26 per cent on Tuesday, shaving nearly US$40 billion off the bank's market value. The company was first listed on the New York Stock Exchange in 1979.

JPMorgan Chase and Citigroup, its closest rivals, slumped more than 10 per cent and just under 13 per cent, respectively. The Dow Jones US financial index .DJUSFN sank more than 10 per cent.

Charlotte, North Carolina-based Bank of America reported a steeper-than-expected 68 per cent fall in quarterly profit on Monday, cut its dividend in half and announced the plans to raise cash.

Some investors and analysts saw the timing of the move to raise capital as an attempt to beat rivals to the market while there is still an appetite for financial shares as the credit crunch intensifies.

'(Lower) earnings, cutting dividends, forecasting difficult times ahead - I think that's going to be the mantra for most companies reporting, particularly in the financial area,' said Mr Robert Lutts, chief investment officer of Cabot Money Management in Salem, Massachusetts.

'These are the most difficult times for financial institutions that I have experienced in my 39 years in banking,' Mr Kenneth Lewis, chairman and chief executive of BoA said on Monday.

'It was a perfect storm kind of quarter,' he said later in a conference call with analysts.

Last month, Goldman Sachs sold US$10 billion in securities, and Citigroup and Wells Fargo, said they will raise capital if they succeed in their bids for Wachovia.

'With such massive capital raises, we believe a 'sooner-is-better' mentality will prevail as far as capital raises and distinguish survivors and the more challenged among banks,' wrote analyst Meredith Whitney at Oppenheimer & Co in a report sent out on Tuesday morning.

Market timing
After the market closed, Bank of America said it sold 455 million shares at US$22 each, a 7.4 per cent discount to its already depressed closing price, managing to just raise US$10 billion. Companies selling new shares often raise significantly more than expected, and Bank of America executives had said it was possible they would raise more than the targeted amount.

Bank of America and Merrill Lynch served as joint bookrunners on the offering.

Underwriters have the option to buy up to 68.25 million additional shares.

Shares of the bank slipped to US$22.89 in after-hours trading, almost 5 percent lower.

Citigroup has already forecast a third-quarter loss, while quarterly results at top rivals such as JPMorgan remain a big question mark.

Analysts noted Bank of America's results showed credit quality weakening across most types of loans, and declines in both debt and credit card purchase volumes, which also are important businesses at Citi and JPMorgan.

'Bank of America is so large, it's such an industry bellwether, how can these other banks not be experiencing the same thing?' Mr David Dietze, chief investment officer at investment manager Point View Financial Services said on Tuesday.

An additional concern for Bank of America is the financial health of Merrill Lynch, which it is set to buy next year.

Merrill is likely to post large write-downs from its fixed-income, currencies and commodities business this quarter, and its valuable wealth management business also may be starting to feel the pinch, according to Wachovia Capital Markets analyst Douglas Sipkin.

Trouble at the wealth management unit would not be a positive for Bank of America. Chief Executive Kenneth Lewis described the business as the 'crown jewel' of the Merrill acquisition when the deal was announced last month.

Merrill also is facing a US$5 billion call for collateral from JPMorgan, reported CNBC. According to the news network, Merrill is resisting the collateral request on 'principle' rather than because of liquidity concerns. A spokesman at JPMorgan and a spokesman for Merrill declined comment.

Bank of America shares fell US$8.45 to US$23.77 on the New York Stock Exchange. The shares have traded in a 52-week range of US$52.95 to US$18.44. -- REUTERS