Big Banks: 'Operation Twist' Losers

The fallout from "Operation Twist" continued Thursday, as the broad market tanked and the largest U.S. bank holding companies all saw share prices continue to decline.

The sell-off continued after the Federal Reserve announced it would shift its investment strategy to further boost the economy, by purchasing $400 billion in U.S. Treasury securities with maturities of six years to 30 years, while selling $400 billion in short-term Treasuries, by the end of June 2012.

The Fed also said it would reinvest principal payments from agency debt ad agency mortgage-backed securities into more agency-backed MBS. The moves are designed to lower long-term interest rates while keeping short-term rates between 0% and 0.25%, which investors expect to reduce banks' net interest margins, at least over the short term.

The Dow Jones Industrial average trimmed earlier losses but was ended down nearly 400 points, and commodity prices showed continued weakness.

The KBW Bank Index (I:BKX) was declined 3% to close at 34.45, with all 24 index components showing declines, except for U.S. Bancorp (USB), which was up a nickel to close at $22.91.

Contributing to the weakness among the financial names was a bearish comment from Thomas Huertas -- a member of the executive committee at the U.K. Financial Services Authority and alternate chair of the European Banking Authority -- that "the days when banks can aspire to earn a 20% rate of return on equity and remain a AA+ credit are over." Heurtas made the comment at a regulatory conference in Washington, according to an SNL Financial report.

Citigroup (C) was the loser among major U.S. financials, with shares dropping over 6% to close at $23.96.

Shares of American International Group (AIG) declined 6% to close at $21.61.

Large banks seeing shares decline 5.5% included Morgan Stanley (MS), which closed at $13.06, and Regions Financial (RF), closing at $3.42.

Bank of America (BAC) was down 5% to close at $6.06.

Large financial names seeing 4% declines heading into the last hour of trading included SunTrust (STI), which closed at $16.94; Goldman Sachs (GS), at $93.98; and JPMorgan Chase, which closed at $29.27.