By Nupur Anand and Niket Nishant

(Reuters) -Shares of U.S. banks tumbled to multi-month lows on Thursday, after President Donald Trump's sweeping tariffs plan sparked fears of a recession and a slowdown in consumer spending that could hurt earnings.

Citigroup fell over 12%, while Bank of America sank 11%. Morgan Stanley, Goldman Sachs and Wells Fargo fell over 9% each. JPMorgan Chase, the biggest U.S. bank, dropped over 7%.

"There has been a selling spree on banking stocks today due to slower economic growth potential and the credit stress emanating from it for banks," said Walter Todd, chief investment officer at Greenwood Capital.

Big U.S. banks will start reporting earnings this month, with JPMorgan, Wells Fargo and Morgan Stanley announcing their first quarter earnings on April 11.

The banks' comments on the outlook will be key for insight on the coming quarters.

"Investors are conditioned to sell banks at any bad news, considering these stocks are so economically sensitive. So even if fundamentally banks remain in a strong position, which we are likely to see in the earnings, the attitude towards the stocks remains negative," said Chris Marinac, director of research at Janney Montgomery Scott.

The moves mark a sharp reversal of fortunes for the banking sector, which as recently as a few months ago had projected a bright outlook for 2025 on hopes of M&A deregulation and lower corporate taxes.

But uncertainty fueled by Trump's 10% baseline tariff on all imports has raised fears of a global trade war as some countries vowed to retaliate.

Economists warn tariffs could slow the global economy, raise the risk of recession, and increase living costs for the average American family by thousands of dollars - all bad news for banks.

"The banking industry is tied very closely to what happens in the macroeconomic environment, so if consumer spending and corporate investment slows down or if the unemployment rate goes up, then all of this has a materially adverse impact on the U.S. banking industry," said Morningstar senior equity analyst Suryansh Sharma.

With companies holding off acquisitions amid tariff uncertainty, investment banking income is likely to remain under pressure. Analysts warned that weakening consumer confidence could dampen spending and curb loan demand.

"It will impact loan growth and credit quality. We can also see material impact on mergers and acquisition, equity underwriting and investment banking revenue. And, when capital markets correct, they directly impact the asset management fees," Sharma added.

The U.S. banking sector has broadly been performing well with robust earnings and non-performing loans under check, prompting some analysts to predict the sector may yet weather the challenges without a significant hit to earnings.

"Even though they are on solid ground now, there is no indication that fundamentals will get better for them in the short run or that earnings will go up significantly and so I don't see any reason why investors will find the bank stocks attractive," said Dave Ellison, a portfolio manager at Hennessy Funds.

On the flip side, trading may emerge as a bright spot for banks given the market volatility.

"If you are a large bank with a significant trading desk then you may be able to participate in extra volatility in weeks like these which could cushion earnings," Marinac added.

Regional lenders that have smaller trading operations may not have that same advantage and run the risk of being hit harder than larger peers.

The KBW Regional Banking Index fell nearly 10% on Thursday, its biggest one-day slide since the March 2023 regional banking crisis.

Financial technology firms were also hard hit on Thursday, led by Affirm, which was down more than 18.5%. SoFi was down 13.5%, while Robinhood was down more than 10%.

(Additional reporting by Arasu Kannagi Basil in Bengaluru and Hannah Lang in New York; Editing by Arun Koyyur and Deepa Babington)