The Federal Reserve Board kept its benchmark interest rate at 5.25% Wednesday for the third consecutive month, but the market focused more on earnings reports as several bankers gave gloomy outlooks.
Shares of TD Banknorth Inc. fell 1% after the Portland, Maine, company, which is 56% owned by Toronto-Dominion Bank, reported third-quarter earnings that missed estimates by a penny and said a near-term profit improvement was unlikely.
"We don't want you to be pessimistic, but we don't want you to be optimistic at the same time," chairman and chief executive William J. Ryan said on a conference call with investors. Mr. Ryan said that the 51 cents a share TD Banknorth reported Wednesday is a good gauge of earnings for the next six months.
Last month he had guided investors lower on earnings expectations for the third quarter, and the company's $86.1 million profit translated into operating earnings that were a penny short of the average analyst estimate. Net income fell 3% from a year earlier.
Mark Fitzgibbon, director of research at Sandler O'Neill & Partners LP, said he took Mr. Ryan's candor as a bearish signal. "We are not looking for earnings to grow much at all," Mr. Fitzgibbon said.
Shares of New York Community Bancorp closed down 0.6% after it reported earnings of 21 cents a share, missing analyst estimates by 2 cents. The Westbury company's profit fell 19.5%, to $62.5 million.
Thomas R. Cangemi, New York Community's chief financial officer, said on a conference call, "We're refraining from doing aggressive growth in this environment."
"If the yield curve changes and there's attractive spreads to be made, then we have the capital to grow the balance sheet," Mr. Cangemi said. He said he did not expect the yield curve to improve anytime soon.
Shares of Seacoast Banking Corp. of Stuart, Fla., fell 8.8% after it missed analyst estimates by 7 cents. Third-quarter profit rose 5.5%, to $5.9 million, but per-share earnings of 31 cents fell a penny from a year earlier.
Dennis S. Hudson 3rd, Seacoast's chairman and CEO, said in a press release issued late Tuesday: "While our earnings growth has been strong over the past two years, the trends that emerged during the latest quarter slowed our progress in the near term. Headwinds … are likely to remain with us well into next year."
James C. Record, an analyst with Sterne, Agee & Leach Group Inc., said in a research note that Seacoast's results were "surprisingly bad," and Jennifer Thompson of Oppenheimer & Co. Inc. downgraded the stock to "sell," from "neutral."
The American Banker index of 225 banks rose 0.5%. Bank stocks and the broader market had a volatile day despite the Fed's announcement in early afternoon. The Standard & Poor's 500 rose 0.4%.
Gainers included the auto lender AmeriCredit Corp., which said Tuesday after market close that its profit rose 37% from a year earlier, to $74 million, and on Wednesday its stock rose 9.6%. Its per-share earnings of 54 cents beat the average estimate by a penny.
Countrywide Financial Corp. rose 3.8%. On Tuesday the Calabasas, Calif., company reported earnings that fell short of analyst estimates, but said it would cut 4% of its work force, eliminating 2,500 jobs, because of slowing mortgage originations. That lifted its stock 6% Tuesday, and it rose 3.8% Wednesday.
