Bank of America Corp. led bank stocks to their fourth consecutive day of gains as investors continued to use any positive comments about the industry as reason to buy stocks that have been enormously oversold.
The KBW Bank Index soared 11.23% Thursday, extending its ascent this week amid reports that companies like Citigroup Inc. and Bank of America expect to report operating earnings this quarter, plus moves in Washington to ease mark-to-market accounting rules.
"All of this has helped propel bank stocks higher in a generally oversold condition," said Gary Townsend, the chief executive at Hill-Townsend Capital LLC. "But this is a bear market rally, and it's a head fake, so enjoy it while it lasts. Get ready for another test of the lows."
B of A's shares rose 92 cents, to $5.85, after the Charlotte company's chairman and chief executive, Kenneth Lewis, said it would earn $50 billion in the first quarter, before taxes and loan-loss provisions; he did not say how much the credit losses would be.
Lewis' statements piggybacked on the disclosure this week by Citi that it is also making money so far this year, before loan-loss provisions. On Thursday, Citi rose 13 cents, to $1.67.
"People are starting to remember that these are banks that are facing ongoing concerns every day, bringing in interest income because their borrowing costs are so cheap," said Cassandra Toroian, the president and chief investment officer of Bell Rock Capital LLC in Rehoboth, Del. "If margins widen out between 5% and 6%, that means, even if they have to put a substantial amount away for loan losses, they are still profitable."
Also Thursday, Financial Accounting Standards Board Chairman Robert Herz told members of the House Financial Services subcommittee on capital markets that his group would introduce guidelines within three weeks on mark-to-market accounting rules, giving banking companies more flexibility to value the assets on their balance sheets. Both analysts expressed doubt that the accounting board could make sufficiently substantive changes to truly benefit banking companies.
The rally in bank stocks was across the board. JPMorgan Chase & Co. rose 13.7%, Wells Fargo & Co. 17.4%, U.S. Bancorp 10.8%, Bank of New York Mellon Corp. 9.5% and State Street Corp. 8.6%.
Among the regionals, PNC Financial Services Group Inc. rose 15.1%, Comerica Inc. 10.8%, KeyCorp 13.2%, Bank of Hawaii Corp. 7.3%, Regions Financial Corp. 23 cents, to $3.76, and Fifth Third Bancorp 14 cents, to $1.68.
The broader markets also rose.. The Dow Jones industrial average was up 3.46%, and the Standard & Poor's 500 index 4.07%.