Shares of the largest U.S. banks all declined in afternoon trading, led by Citigroup Inc.'s 4.68 percent decline to $4.67.

The drop outpaced a 3.6 percent dip in the KBW Bank Index and a 2.2 percent decline in the S&P 500 Index.

Bank of America said that it was writing down another $10 billion of goodwill, but investors largely focused on the macro picture in deciding which bank stocks to sell.

Analysts and investors said U.S. banks with a global reach would most likely feel the effects of an economic downturn driven by turmoil in the Middle East.

"If the wheels come off globally, the first thing that's hit is the financials," said Bill Smith, founder of Smith Asset Management in New York, which owns bank stocks. Smith said he is not selling his financial shares amid the broader share decline.

The share drop is one of the first stumbles in a nearly three-month rise in banks' share prices. The KBW Bank Index has risen 24 percent since November 30 and peaked on February 14.

Citigroup, more than larger U.S. rivals Bank of America Corp. and JPMorgan Chase & Co., is relying on its large international business for future growth. Bank of America and JPMorgan Chase were down 3.9 percent and 4 percent, respectively.

Marshall Front, founder and chairman of Chicago-based investment firm Front Barnett Associates LLC, said Citigroup's global business made it more vulnerable to a downturn in foreign markets.

The Middle Eastern upheaval "has an impact on the credit quality of the loans in (U.S. banks') portfolios and their ability to grow their business," said Front, whose firm owns bank stocks.

A $10 BILLION WRITEDOWN

The renewed global fears come one day after BofA announced a surprise goodwill writedown at a subsidiary credit card bank. But investors largely dismissed the writedown.

"This is pretty much a one-off," said Smith, who said the goodwill announcement was not making him consider selling his Bank of America shares.

The bank said on Monday that it would restate 2009 and 2010 financial reports filed with bank regulators for a subsidiary, FIA Card Services, to include a $20.3 billion goodwill writedown. The bank had previously taken a $10 billion writedown, which it reversed on Monday.

The Charlotte, North Carolina-based bank said on Monday the charge was related to deteriorating credit quality and the affects of the CARD Act on its operations in 2009.

The card unit is a bank-chartered subsidiary that includes BofA's credit card operations and is part of the bank's larger card services unit.

The bank's card businesses have carried billions in goodwill since the bank bought credit card giant MBNA in 2005 for $35 billion.