Bank stocks followed the overall equities market Tuesday, posting healthy gains even with some analysts questioning the sector's ability to sustain momentum.
The American Banker index of 225 bank stocks rose 1.95%, and its index of the top 50 thrifts rose 0.77%. The Standard & Poor's 500 rose 1.04% and the Dow Jones industrial average rose 0.7%.
Only nine banks and thrifts among the American Banker indexes posted losses Tuesday.
Expectations for a more benign Federal Reserve Board policy on interest rates may have played a role. Medley Global Advisors said in a report that it expects the Fed to raise rates only once or twice more, which might mean they will top out at 5%.
Analysts also pointed to interest in the acquisition potential of regional banks in the wake of Capital One Financial Corp.'s agreement, announced Sunday, to buy North Fork Bancorp. of Melville, N.Y., and pay a 34% premium for its core deposits.
Robert Patten, an analyst at Regions Financial Corp.'s Morgan Keegan & Co. Inc., said regional banks in particular are in "deal heaven" as investors try to anticipate which company will be bought next. "I am getting a little cautious on valuations due to fundamentals, since we're looking for at least two more rate increases," he said.
But Nancy Bush of NAB Research LLC said the "off the wall" deposit premium of the North Fork deal might be "an impediment to the next deal."
National City Corp. rose 2.1% despite reporting that its loan portfolio remained relatively flat in the first quarter. But the Cleveland company said in its midquarter filing with the Securities and Exchange Commission that its net interest margin would probably be higher than it was in the fourth quarter.
Other gainers included the student-loan servicer First Marblehead Corp. (5.7%), W Holding Co. Inc. of Mayaguez, Puerto Rico (4.2%), and Glacier Bancorp Inc. of Kalispell, Mont. (3.9%).
Shares of Capital One fell 0.9% after slipping 7.6% Monday.
Other decliners included Provident Financial Services Inc. of Jersey City (1%), TD Banknorth Inc. of Portland, Maine (0.8%), and Fulton Financial Corp. of Lancaster, Pa. (0.8%).
