Stocks: Some Banks May SeeBoost in Stocks from Listing in Key Index

A host of bank stocks may soon receive a boost from inclusion in an important market index.

The Frank Russell Index, which tracks the 3,000 largest public companies in terms of market capitalization, is preparing to add 17 bank stocks-many more than in previous years.

For investors, top prospects headed to the Russell index are Capital Federal Financial, CFS Bancorp, Hudson River Bancorp, Premier National Bancorp, and St. Francis Capital Corp.

These banks have the highest-quality balance sheets and most attractive valuations, according to Sandler O'Neill & Partners of New York.

The final Russell list will be unveiled July 8, but Mark Fitzgibbon, managing director of Sandler O'Neill, urged investors to act early, based on the experience of the last few years.

"We have noticed that shares of companies added to the Russell indexes soon tend to outperform their peers," he said.

But he also noted that investment opportunities exist in stocks of companies leaving the index.

"Those deleted from the index have tended to underperform," Mr. Fitzgibbon said. That would give investors a chance to purchase shares of quality companies on weakness.

Bank stocks slated to be dropped by Russell but that Sandler O'Neill analysts say still offer good future prospects are PBOC Holdings, unchanged Monday at $8.3125; WSFS Financial Corp., down 0.9% at $13.75; and Washington Trust Bancorp, unchanged at $16.50.

Mr. Fitzgibbon said the stock price movements happen because many mutual funds use the indexes of Frank Russell Co., a private money manager and research firm, as their basic framework for investing.

Every year, after the index is reconfigured, a host of funds adjust their portfolios by purchasing the newly added stocks and selling those that have been deleted, Mr. Fitzgibbon said.

Meanwhile, in Monday's market, bank shares turned in a mostly mixed performance.

In afternoon trading two stocks stood out because of an unusual rise in their prices. Fifth Third Bancorp was up 3.7%, to $67.50, and PNC Bank Corp. 2.15%, to $56.50. Fifth Third ended the day up 3.36%, at $67.25, and PNC 1.24%, at $56.

The Standard & Poor's bank index dropped 0.42%, while the blue chip Dow Jones industrial rose 0.69%. The Nasdaq bank index gained 0.2% and the broad market S&P 500 index 0.03%.

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