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Second quarter marks against securities have ranged to 5% or more of tangible equity, but markets have looked past the losses and bid up bank stocks.
July 23 -
Bank of America says it can rebuild its share of the home loan market as rates rise, but its mortgage business relies more on refinancings than at other big banks.
July 17 -
Share buybacks have been dormant at big banks and dividends remain slim, but capital payouts are gaining momentum after this winter’s stress tests.
April 11
The surge of institutional money into banking stocks is likely to continue for at least another quarter, according to Keefe, Bruyette & Woods.
Institutional investors favored large and small-to-mid-cap banks in the second quarter; those categories outperformed the S&P and overall financial stocks, a research team at KBW wrote in a Monday note to clients. Large banks gained 9% during the second quarter, while small and midsize banks gained 6%.
Life insurers, which gained 17%, and broker dealers, which gained 10%, were the best performing financial stocks during the second quarter.
The analysts said they expect institutional investors to continue to favor banks in the third quarter. Small and midsize banks have shown the best performance among any sector of financial stocks from July 1 to Aug. 22, gaining 10%. Large banks are up 5% over the same period, while financial stock were up 6%.
Because of this strong performance, institutional investors have increased their weighting in banking stocks and are likely to keep doing so, the analysts said. Institutional funds have increased their overweighting of large banks' stocks by 9 basis points and small to midsize banks by 4 basis points so far in the third quarter.
On the whole, financial stocks have slightly underperformed the market so far this quarter, gaining 2.8%, compared to a 3.4% rise in the S&P 1500 index.