This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Bank of America Scores Biggest Bounce

Updated to note Tuesday's rally in the financial stocks. NEW YORK ( TheStreet) -- Such courage was in short supply at the time but the fearless investor choosing to buy into the big banks while the markets were in freefall a year ago would by far have done best with Bank of America (BAC - Get Report).

The stock plumbed its 52-week low of $3 on March 6, and it's soared nearly 460% since then based on last week's closing price of $16.70. The performance of the other bellwether financials on the same basis is impressive as well (See chart above), but perhaps the real message to be gleaned from this appreciation is what a challenge it will be for the group to put together a meaningful run-up from here.

The circumstances behind last year's extreme weakness were extraordinary so it's fair to say that the levels visited last March have an element of artificiality to them. After all, the lows were made when worries about the stability of the financial system itself were rampant. Still, looking back and seeing that five of these six companies (with Morgan Stanley (BAC - Get Report) being the laggard, rising a mere 82 percent off its low of $16.12 on March 9, 2009) have more than doubled in the past year does make one wonder what happens if the economy's recovery doesn't quite continue apace.

On the bear side of the ledger, fourth-quarter results were disappointing in general, stalling an early 2010 rally in the banks. Credit costs seem to have peaked but it's still not clear when the banks will get back to normalized earnings growth. Another lingering issue is what the new capital requirements will be going forward. Judging by the demands made by the government in order to allow the banks to pay back bailout funds, the target seems to be a Tier 1 common ratio of around 8%. But if the requirements are set higher, banks may need to sell even more stock to raise the necessary funds, subjecting existing shareholders to further dilution.

This month wraps up the end of the first quarter, and the reports from the big banks will start appearing in mid-April. Between dealing with the fallout of the CARD Act and heightened mortgage repurchase requests, there's certainly a chance that earnings could fall short of expectations.

Citigroup (C - Get Report), for example, is projected to break even for the period, which would be a strong improvement from its in-line loss of 33 cents a share in the fourth quarter. Goldman Sachs (GS - Get Report) is currently expected to earn $4.23 a share for the March period, but Rochdale Securities analyst Richard Bove cut his 2010 estimates for the company last week, citing a belief that the Greek debt crisis had slowed trading. If that turns out to be true, the competition will take a hit as well. M&A is tracking along with last year's hobbled pace, so investment banking operations shouldn't be counted on to deliver an upside surprise.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $15.58 0.00%
C $51.38 0.00%
GS $179.19 0.00%
JPM $61.93 0.00%
MS $32.72 0.00%


Chart of I:DJI
DOW 17,084.49 +33.74 0.20%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,830.47 +19.6820 0.41%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs