U.S. bank shares fall amid growing fears of losses

NEW YORK (Reuters) - U.S. bank shares fell on Tuesday after a U.S. regional bank recorded a huge loss, the Royal Bank of Scotland posted the biggest loss in UK corporate history, and the British government launched a second bank rescue package.

Bank of America shares fell 7.5 percent to $6.64 in premarket trading, hitting their lowest level in almost 18 years. J.P. Morgan Chase & Co stock was down 6 percent to $21.45 and Wells Fargo shares lost 9.8 percent to $16.85.

On Monday, RBS said it was on course to report a 2008 loss of up to 28 billion pounds ($41 billion) after suffering hits from bad debts.

"We have got a crippled financial sector, not only in the U.S. but across the globe," said Keith Wirtz, president and chief investment officer of Fifth Third Asset Management. "We thought 2008 was bad. I think 2009 is going to be a continuation of that whole song."

On Tuesday, Regions Financial Corp , a large U.S. Southeast regional bank, reported an unexpected $6 billion charge to write down parts of its banking business, bringing its fourth-quarter loss to $6.22 billion.

State Street Corp , the world's biggest institutional asset manager, posted rising unrealized losses in its commercial paper program and investment portfolio.

Bank stocks rallied in December but fell under renewed pressure last week, when Bank of America Corp posted its first quarterly loss in 17 years and Citigroup Inc reported its fifth straight quarterly loss.

Bank of America secured a second round of government aid, and Citigroup said it would split into two units and shed troubled assets.

"We were expecting bad news, but maybe later in the year, not right out of the gates," Wirtz said.

State Street shares sank 37.3 percent to $22.77 in premarket trade, while Regions Financial's stock was down 11.5 percent to $5.37.

(Reporting by Juan Lagorio, editing by Johhn Wallace)