Banknorth Group, First American Corp., and other regional banks advanced Tuesday as the sector delivered solid earnings as promised-with no hint of any impact from Asia's problems.
For regional and community banks, "it was a quarter with few if any surprises in the level of earnings and nature of the earnings stream," said analyst Frank J. Barkocy of Josephthal & Co.
Banknorth rose 50 cents, to $62.50, after a reiterated "buy" recommendation by Mark T. Fitzgibbon of Sandler O'Neill & Partners.
The analyst said Banknorth deftly managed the impact from the flattened yield curve by using cash flows from residential mortgage prepayments to make higher-yielding commercial loans.
First American was up 75 cents, to $47, after Hope R. Willard at J.C. Bradford & Co. reiterated a "buy" recommendation. Solid earnings and growth potential prompted the assessment, she said.
Fourth-quarter strength at regional and community banks should go far to separate these institutions from the handful of very large bankingcompanies that are being sold on overseas jitters, Mr. Barkocy said. "Institutions that met or exceeded expectations are finally getting back some recognition."
But not every regional rose. Hibernia Bancorp fell 6.25 cents, to $17.625, after its shares were added to Josephthal's "focus list."
The New Orleans company "is a major factor in Louisiana banking," making it an attractive takeover target, Mr. Barkocy said. The company has also demonstrated "solid, consistent fundamental growth."
And Alabama National Bancorp fell 50 cents, to $26, after Ms. Willard repeated a "buy" recommendation.
The bigger banks continued taking hits, on continued unease about events overseas. J.P. Morgan & Co., was down $1.625, to $105.25 after it reported lower foreign trading income. Citicorp fell 87.5 cents, to $119, despite a "strong buy" recommendation, up from "buy," by Thomas Hanley of UBS Securities.
But much of Tuesday's action, in terms of upgrades and reiterated "buy" recommendations, was among regionals.
Analysts following these banks said they felt vindicated that earnings came in on target.Market watchers had maintained that their group was being unfairly penalized by overseas jitters. "Being down here, it's been hard to get worked up over what's going on in Asia," said Ms. Willard of Nashville- based J.C. Bradford.
For the day, the Standard & Poor's bank index rose 0.88%, and the Dow Jones industrial average was up 1.54%. The Nasdaq bank index gained 1.12%, and the S&P 500 increased 1.77%
Mellon Bank Corp. fell 56.25 cents, to $59.5625, as the company's new succession plan signaled continued independence. Though its shares may no longer be bid up on takeover speculation, they still are a bargain, asserted George A. Bicher of BT Alex. Brown.
Mr. Bicher reiterated a "buy" recommendation Tuesday, citing Mellon's "improved earnings quality, visibility," and growing ability to generate fee income from trust and mutual fund operations.