* FTSEurofirst down 2.5 percent, worst fall since mid-March
* Fortis biggest loser after scaps dividend, issues shares
* Banks hit by Goldman note; autos also down
By Patrizia Kokot
LONDON, June 26 (Reuters) - European shares fell to their
lowest close since October 2005 on Thursday, with banks the
heaviest-weighted losers after a bearish note from Goldman Sachs
reignited fears of further losses in the sector.
The FTSEurofirst 300 <> closed down 2.5 percent at
1,197.02 points, suffering its worst one-day percentage fall
since mid-March.
Goldman Sachs downgraded U.S. brokerages to neutral and
added Citigroup to its "conviction sell" list, forecasting more
writedowns.
"We see multiple headwinds for Citigroup including
additional write-downs, higher consumer provisions as a result
of a rapidly deteriorating consumer credit trends, and the
potential for additional capital raises, dividend cuts, or asset
sales," Goldman said, estimating that Citigroup would take an
additional $8.9 billion in net writedowns in the second quarter.
Dutch-Belgian bancassurer Fortis <FOR.BR> <FOR.AS> was the
biggest percentage loser in Europe, ending 19 percent lower
after saying it would shore up its balance sheet with measures
worth over 8 billion euros, including scrapping its interim
dividend and issuing new shares.
A statement by Chinese shareholder Ping An Insurance
<2318.HK> that it is planning to buy 5 percent of the shares to
maintain its holding failed to support the stock.
Banks in general tracked U.S. losses with Barclays <BARC.L>
shedding 5.7 percent, Credit Suisse <CSGN.VX> down 4 percent and
Deutsche Bank <DBKGn.DE> down 3.3 percent.
"There is a tremendous amount of uncertainty around in the
entire financial services sector because we don't really
understand what they are actually holding and what they are not
holding," Octavio Marenzi, head of financial services
consultancy Celent said from Paris, referring to Goldman's
comments on Citigroup.
"I am not sure how they have come to their conclusions but
when you see what happened to Bear Stearns -- 48 hours before
the collapse things seemed okay -- so when people are valuing
the sector now they prefer to err on the side of caution,"
Marenzi added.
Germany's Hypo Real Estate <HRXG.DE> fell 7.3 percent after
U.S. private equity investor JC Flowers finalised the
acquisition of a 24.9 percent stake in the company,
Auto stocks were also heavy decliners, with the DJStoxx
European Auto index <.SXAP> down 4 percent.
Chrysler denied market rumours that it was facing a cash
crunch or that it had been driven to filing for Chapter 11
bankruptcy, and a disappointing outlook from Goodyear <GT.N>
also weighed on European peers Michelin <MICP.PA>, down 6.5
percent, and Continental AG <CONG.DE>, down 4.7 percent.
BMW <BMWG.DE> fell 4.2 percent, Renault <RENA.PA> was down
5.7 percent and Daimler <DAIGn.DE> fell 3.3 percent.
Across Europe, Britain's FTSE <>, Germany's DAX
<> and France's CAC <> all lost between 2.4 and 2.6
percent.
Among rare gainers was paper maker Stora Enso <STERV.HE>,
which rose 2.5 percent after Finland said it would compensate
the sector for a hike in wood tariffs.
(Editing by Quentin Bryar)
