Wednesday's Financial Winners & Losers

The financial sector was replete with bad news yet again on Wednesday, though Tuesday's three-quarter-point rate cut by the Federal Reserve continued to help the sector stay afloat for much of the day.

As with so many others in the industry, mortgage-market cavorting has helped infect SunTrust (STI Quote), making it the latest big bank to report that putrid market conditions essentially annihilated its fourth-quarter profit -- in this case to just $3.3 million, or a penny a share. That almost wholly wipes out last year's earnings of $498.6 million, or $1.39 a share. Analysts polled by Thomson Financial were looking for a profit of 31 cents a share, excluding items.

SunTrust blames these results mostly on the shrinking value of holdings in mortgage-backed securities, collateralized debt obligations and structured investment vehicles (SIVs), as well as a costly restructuring of the SIVs. At the time of purchase, it said, these were all "predominantly AAA or AA-rated." The SIV bail-out was announced last month, along with news of SunTrust's share of a Visa antitrust settlement, which ended up costing the bank $76.9 million.

Also figuring in prominently were charge-offs of $168 million and a loan-loss provision that more than doubled sequentially to $356.8 million. Both of those figures are slightly under estimates given in December.

In spite of all this, shares were climbing 5% to $64.05 following an initial tumble.

That, along with Bear Sterns' burly upgrade of the broader large-cap bank sector -- to market overweight from market underweight -- helped push the KBW Bank Index 3.3% higher to 80.14. According to Reuters, the Bear analyst argued that, thanks to the Fed's rate cut and a spree of capital infusions, these stocks can't go down much further.

Banking giants Citigroup (C Quote), JPMorgan Chase (JPM Quote) and Bank of America (BAC Quote) were all trading up 5.4% or more.

And shares of bond insurer Ambac (ABK Quote) continued clawing their way back from the precipitous drop they took last week, even after yesterday's report of an enormous fourth-quarter loss, which was followed today by Goldman Sachs slashing its price target to $10 from $14. Regardless, Ambac shares lately took back another 27% to $10.12.

MBIA (MBI Quote), another bond insurer, was adding 13.6%.

Elsewhere, California bank Downey Financial (DSL Quote) set aside $218.4 million to cover bad loans in the fourth quarter, vaulting from credit-loss provisions of $81.6 million last quarter and $200,000 last year. In large part due to that, the bank swung to a fourth-quarter loss of $108.8 million, or $3.90 a share, compared with a year-earlier profit of $1.87 a share. Wall Street was seeking a 6-cent loss per share.

First Midwest Bancorp's (FMBI Quote) fourth-quarter loss, panning out at 11 cents a share, also reverses a year-ago profit. Taking heavy blame here is the dwindling value of the bank's investments in asset-backed collateralized debt securities, without which First Midwest would have earned 56 cents a share.

Still, Downey shares were jumping 17.8% to $30.30, and First Midwest was up 3.9% to $27.03.

By contrast, asset manager Piper Jaffray (PJC Quote) actually smashed Wall Street targets with fourth-quarter income of $15.1 million, or 91 cents a share. That's a sizable drop from last year's $1.49 a share from continuing operations, though the year-ago figure had included a massive litigation-related benefit. Analysts were seeking 56 cents a share. The Minneapolis-based firm's stock was leaping $7.74, or 19.1%, to $48.17.

Fulton Financial (FULT Quote) climbed 10.5% after the Pennsylvania bank met Street estimates for the quarter and beat them for the year, and TCF Financial (TCB Quote) reported a growing quarterly profit of $62.8 million, or 50 cents a share, compared with 42-cent EPS last year. The Minnesota bank also upped its dividend by 3.1% to 25 cents a share. Its shares rode 13.1% higher at $18.61.