Financial Winners and Losers: BofA

Updated from 3:56 p.m. EDT

Financial stocks closed Friday with a flourish, after a mixed session in which investors digested sour economic data and mulled how banks would fare under accounting rule changes for hard-to-value illiquid assets.

On Thursday, the Financial Accounting Standards Board agreed that the objective of mark-to-market accounting still involves what would be received in an orderly transaction in a currently inactive market. However, the board said that an "orderly" transaction does not include a forced liquidation or distressed sale, which will allow assets to be valued differently.

The U.S. economy lost 663,000 jobs in March, and the unemployment rate rose to 8.5%, essentially meeting the bleak estimates of Wall Street economists.

Several big banks were falling in the first part of the day, but turned positive and closed with solid gains. Bank of America (BAC) shares closed up 5% to $7.60. Wells Fargo (WFC) shares rose 6.6% to $16.34. JPMorgan Chase (JPM) shares rose 4% to $29.28, while Citigroup's (C) stock rose 4% to $2.85.

Large regional banks like PNC Financial Services (PNC) surged 11% to $35.80 on Friday. SunTrust Banks (STI) shares climbed 7.8% to $13.82.

"All the banks were down and they came back to life here a little," says Kevin Fitzsimmons, an analyst with Sandler O'Neill & Partners. "There may be the perception if they are relaxing mark to market [rules], the bigger [banks] with bigger securities books may benefit more."

Christopher Marinac, a managing principal at broker-dealer FIG Partners, says some investors are optimistic that SunTrust has passed its stress test, in addition to the stock being cheap.

While some market observers say the mark-to-market rule modification could significantly change the earnings outlook for banks in the quarters to come, others say the benefits are "overblown."

"[T]he market's reaction to the FASB mark-to-market vote is completely overblown, and the benefits from these 'changes' will have very little impact on financial institutions' accounting practices," writes Friedman Billings Ramsey analysts in a brief note. "FASB did not change the rules, but rather provided additional guidance to existing rules that gives companies more latitude in determining whether a transaction in an inactive market is distressed."

The analysts do not expect the guidance to have "significant" impact on bank earnings or capital levels. In addition, "the fundamentals of these banks have not changed -- credit deterioration will continue in our opinion regardless of any mark-to-market accounting rules," they write.

Both BofA and Citi stated on Thursday that the changes to the rules will result in the addition of just pennies per share to earnings, according to the FBR note.

The Friedman Billings Ramsey analysts say that the FASB's decision to clarify credit deterioration vs. non-credit deterioration other-than-temporarily impaired assets is positive.

MasterCard (MA) and Visa (V) remained in the black throughout Friday. Shares were rising 5.1% and 8.1% respectively for the credit card payment networks.

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