After a three-day slide, banking stocks rebounded Thursday as a key lending rate fell and investors took advantage of the recent slump.

The KBW Bank Index climbed 3.68%.

Greg Gersack, managing principal with FIG Partners LLC, said financial stocks were enjoying a natural bounceback after aggressive selling earlier in the week. Investors were also heartened by successful stock offerings from BB&T Corp. and Wells Fargo & Co., among others.

"That creates a sense of confidence in the space," Gersack said. "In some respects for stock prices, dilution is the new accretion. The industry is getting recapitalized."

Financial stocks were also helped by the fact that the cost of borrowing in dollars between banks experienced its sharpest drop in two months. The three-month London interbank offered rate fell nearly 3 basis points, to 0.85%, according to the British Bankers' Association.

Among the largest gainers in the banking sector were Fifth Third Bancorp, which climbed 7.12%, Wells Fargo & Co., which climbed 6.16%, and Regions Financial Corp., which climbed 5.96%.

Most of the other large national and regional players also climbed. Bank of America Corp. rose 2.72%. JPMorgan Chase & Co. rose 4.38%. U.S. Bancorp rose 2.53%. Capital One Financial Corp. climbed 2.59%, and KeyCorp rose 4.96%.

The overall markets were static, even though bankrupt Chrysler LLC announced that it would close about 25% of its dealerships. In other automotive news, Ford Motor Co. said it was on track toward breaking even in 2011 without any further government aid.

The Dow Jones industrial average climbed 0.56%, and the Standard & Poor's 500 rose 1.04%.

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