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Big Banks: Housing and Earnings Winners

NEW YORK ( TheStreet) -- Most bank stocks were strong on Wednesday, driven by strong housing numbers, while the broad indexes saw only slight gains.

Shares of IBM (IBM) and Intel (INTC) both declined sharply as their third-quarter results underlined the decline in PC sales.

Meanwhile, shares of Bank of America (BAC - Get Report) were down two cents to close at $9.44, after the company reported a small profit, as several items preannounced in September took their toll, including a pretax charge of $1.6 billion from an agreement to settle a 2009 lawsuit with investors related to the acquisition of Merrill Lynch, in addition to a charge of $800 million related to changes in the UK corporate tax rate, and $ $1.9 billion in debit valuation adjustments (DVA) and fair value option (FVO) adjustments.

The above items all matched the preannounced numbers, and Bank of America reported third-quarter net income of $340 million, breaking even on a per-share basis, and beating the consensus estimate of a seven-cent loss, among analysts polled by Thomson Reuters.

Following Bank of America's earnings release, Stifel Nicolaus analyst Christopher Mutascio wrote that the company's better-than-expected results were mainly driven by "1) better than expected mortgage banking revenues of $2.02 billion (versus our estimate of $1.58 billion) 2) better than expected investment banking revenues of $1.34 billion (versus our estimate of $1.09 billion) 3) lower than expected provision expenses of $1.77 billion (versus our estimate of $2.13 billion), and 4) $339 million in investment securities gains."

Mutascio said that the above items added nine cents to BAC's bottom line. The analyst rates Bank of America a "Hold."

The U.S. Census Bureau reported that estimated housing starts during November increased to a seasonally adjusted annualized rate of 872,000, which was a 15% increase from an upwardly revised 758,000 in August. The pace of housing starts in September increased 35% from September 2011.

The Census Bureau also reported that estimated housing permits increased to an annualized rate of 894,000 during September, increasing 11% from the previous month, and a whopping 45% from a year earlier.

the KBW Bank Index (I:BKX) rose 2% to close at 51.06, with all but four of the 24 index components showing gains for the session.
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