Most bank stocks followed the market down Wednesday, but shares of some of the nation's largest banking companies managed to eke out late-day gains.
The market digested some economic data. The Labor Department said productivity fell and wages were higher in the second quarter than in the first, and the Federal Reserve Board's Beige Book said economic growth has slowed in Boston, New York, Philadelphia, Kansas City, and Dallas districts.
"Consumer spending increased modestly in most Districts since the last report, though a few Districts reported flat to declining sales," and manufacturing activity "was reported as generally expanding in all Districts, and contacts were optimistic that activity would continue to grow in the months ahead," the Fed said. (The Beige Book comes out every six weeks; the latest one came out July 26.)
JPMorgan Chase & Co. rose 0.2%, Wells Fargo & Co. rose 0.6%, and the index of banks in the Standard & Poor's 500 was unchanged. But the American Banker index fell 1.4% and the S&P 500 fell 1%.
KeyCorp fell 0.2% after it announced it was selling the 51 retail branches of McDonald Investments Inc., its wealth advisory unit, to the Swiss banking giant UBS AG for up to $280 million. But the Cleveland company said it would keep KeyBanc Capital Markets, its institutional brokerage businesses.
R. Scott Siefers of Sandler O'Neill & Partners LP wrote in a research note, "The sale does relieve KeyCorp of the need to invest in this business to compete more effectively, but it also removes one of the unique businesses that differentiate the company from more 'plain vanilla' regional banking peers."
Anthony R. Davis of BankAtlantic Bancorp Inc.'s Ryan Beck & Co. wrote that his firm expects Key "to redeploy capital to its retail branch franchise, both through upgrades and in-market acquisitions."
Shares of M&T Bank Corp. of Buffalo were among those hit hardest in the large-cap group, falling 1.7%. Merrill Lynch & Co. analyst Edward Najarian downgraded M&T to "sell" from "neutral," saying in a note that its price-to-earnings ratio is high and that in Merrill's view, "its earnings per share growth will decelerate."
People's Bank in Bridgeport, Conn., rose as much as 4% and closed up 2.2% on renewed speculation that the $11 billion-asset mutual holding company could take its second step to convert to a stock company or is about to announce a deal. A spokeswoman would not comment.
Analysts from Sterne, Agee & Leach Inc. and Friedman, Billings, Ramsey Group Inc. said People's has dropped out of banking conferences their firms are holding this month, in Atlanta and Boston, respectively.
It is "unusual for a company to pull out of two conferences in the same month," said FBR's Laurie Hunsicker. People's could be in a "self-imposed quiet period," she said.
Shares fell for two small banks that have just announced deals, Community Banks Inc. of Harrisburg, Pa., and United Community Banks Inc. of Blairsville, Ga.
Community Banks is buying BUCS Financial Corp. of Owings Mills, Md., for $22.6 million, in a deal announced Wednesday, and United is buying Southern Bancorp Inc. of Marietta, Ga., for $66.5 million. That deal was announced Tuesday night.
Community Banks fell 3.5% and United Community fell 2.5% Wednesday. BUCS Financial's price almost doubled to catch up with Community Banks' offer. (Southern Bancorp is not publicly traded.)
