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KeyCorp: Buyback Anticipation Winner

NEW YORK ( TheStreet) -- KeyCorp (KEY - Get Report) of Cleveland was the winner among the largest U.S. banks on Wednesday, with shares rising 1.5% to close at $10.01.

The broad indices all rose slightly after the Census Bureau released its advance estimate that retail sales during February rose 1.1% from the previous month and 4.6% from a year earlier. The sales figures were not adjusted for price increases. Economists on average expected retail sales in February to increase just 0.5% from the previous month, according to Zacks.

Excluding vehicle sales, retail sales in February were up 1.0% from January, ahead of the consensus estimate of an increase of 0.5%.

There were various factors weighing on retail sales, including the end of the temporary 2% cut in the Social Security payroll tax in January, with many workers not being affected until their first 2013 paychecks rolled in on Jan. 15. Deutsche Bank economist Joseph LaVorgna earlier on Wednesday his firm was "projecting slightly below consensus numbers for February retail sales because we believe that a delay in tax refunds could temporarily depress spending," underlining another reason why the Census Bureau's report was a positive surprise.

The KBW Bank Index (I:BKX) rose slightly to close at 56.93, with all but two of the index components showing gains for the session.

Thursday Is Capital Return Day

The Federal Reserve on Thursday at 4:30 p.m. EST, will announce the results of the Comprehensive Capital Analysis and Review of the banks' capital plans through the first quarter of 2014. At roughly the same time, most of the nation's large banks are expected to announce plans to return capital to investors through dividend increases or share buybacks.

Returning capital to investors is the order of the day for banks, with soft loan demand in most areas except for commercial and industrial lending, "which is looking pretty frothy," says Tom Day, a senior director at Moody's Analytics.

Since bank's "don't have asset allocation choices" in the low rate environment, Day says "the choice you have is to give money back to shareholders or look for acquisitions." But for banks looking for deals, "the multiples are not exactly where they want them, because Bernanke has done a great job destroying deposit premiums completely," he says.
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