Banking stocks started Monday's session strong and finished even stronger as Dubai's state-run development conglomerate announced it was working on a debt restructuring to avoid a costly default, giving a late lift to the broader market.
The KBW Bank Index closed 3.35% higher, at 44.48, outpacing the 0.38% gain in the Standard & Poor's 500 index. Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. advanced as analysts pointed out the small exposure American banks have to the trouble in Dubai compared with their European counterparts.
Big banks also got a boost from a Goldman Sachs & Co. note saying the industry appears to be two-thirds of the way through the credit cycle, with 2009 loan losses, trading results and pre-provision earnings tracking better than the government's stress tests in the spring had forecast.
While prime mortgage and commercial real estate trends are troubling, "consumer and commercial-and-industrial losses seem likely to come in below our original expectations," the report said.
Goldman said it will "remain positive on big banks and credit stocks," including Bank of America, JPMorgan Chase and Capital One Financial Corp. Among big-bank stocks, Bank of America rose 2.46%, to $15.85. JPMorgan Chase climbed 2.81%, to $42.49, Capital One rose just over 3%, to $38.36, and Citigroup advanced 1.23%, to $4.11.
Some of the biggest gains of the day came from a trio of Ohio-based regional banking companies: Huntington Bancshares Inc., Fifth Third Bancorp and KeyCorp. Huntington's shares jumped 6.41%, to $3.82, after the company announced late Friday that it had successfully completed its tender offer for subordinated bank notes. The $338.9 million purchase was made possible by a capital raise earlier this year that gave the company extra financial flexibility.
Shares of Fifth Third rose 5.33%, to $10.08, and KeyCorp rose 5.21%, to $5.86.
Marshall & Ilsley Corp. of Milwaukee rose 5.89%, to $5.75.
