Bank stocks rose Tuesday as investors snatched up bargains from Monday's huge selloff.
The KBW Bank Index rose 8.13% after sinking 15.35% the day before. Banking stocks fell early Tuesday after a spate of companies reported first-quarter results, some below expectations. However, the sector recovered before midday to register a healthy gain.
"I think the market believes — at least today — that you buy on the dip," said Gary Townsend, the president and chief executive of Hill-Townsend Capital LLC. "After the big selloff yesterday, there were concerns that it might go farther, but instead, investors saw it as an opportunity to buy on the cheap."
Also Tuesday, Treasury Secretary Timothy Geithner told a congressional bailout oversight panel that most U.S. banks have adequate capital, and that regulators would permit some to repay government capital.
The largest banking company to report Tuesday was U.S. Bancorp, which said first-quarter earnings fell 61% from a year earlier, to $419 million, or 24 cents a share. But the Minneapolis company's results beat analysts' average estimate by 4 cents. U.S. Bancorp's stock rose 20.1%.
Regions Financial Corp.'s first-quarter net income fell 69%, to $77 million. After paying dividends on preferred shares, the Birmingham, Ala., company earned $26 million, or 4 cents a share. Analysts on average had expected Regions to post a loss of 39 cents. Its stock rose 5.9%.
KeyCorp's stock fell 4.7%. The Cleveland company reported a first-quarter loss of $488 million, or $1.09 a share, and said it would slash its dividend to a penny.
Huntington Bancshares Inc. reported a first-quarter loss of $2.4 million, or $6.79 a share, compared with a gain of $127.1 million, or 35 cents a share, a year earlier. Excluding a $2.6 billion goodwill impairment charge, the Columbus, Ohio, company lost 6 cents a share. Analysts on average had expected a loss of 10 cents. Huntington's stock rose 34 cents, to $3.45.
M&T Bank Corp. fell 1.5%. The Buffalo company's first-quarter net income fell 68%, to $64.2 million, or 49 cents a share, reduced by a loss of $20 million, or 18 cents a share, on investment securities. Excluding the one-time charge, analysts had expected a profit of 71 cents a share.
Comerica Inc. rose 15.9%. The Dallas company said first-quarter net income fell 92%, to $9 million. After paying preferred dividends, it posted a net loss of $24 million, or 16 cents a share. Analysts were expecting the company to lose 9 cents a share.
Brett Rabatin, an analyst at Sterne, Agee & Leach Inc., said Comerica's stock rise was likely a result of investor relief that credit costs were not worse than expected, and that the margin bottomed in January and is set to improve in future quarters.
JPMorgan Chase & Co. rose 9.6% Tuesday. Wells Fargo & Co. rose 10.7%. PNC Financial Services Group Inc. climbed 9.5%, and SunTrust Banks Inc. climbed 9.2%. Citigroup Inc. rose 30 cents, to $3.24.
The Dow Jones industrial average rose 1.63%, and the Standard & Poor's 500 rose 2.13%.