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

Regional Banks: Financial Winners

NEW YORK ( TheStreet) -- Shares of regional banks surged on Friday on expectations that they would benefit from higher rates as the Federal Reserve winds down its monetary stimulus program.

The SPDR KBW Regional Banking ETF (KRE) rose 0.9%, outperforming gains posted by the KBW Bank Index (BKX) and the S&P 500.

After Fed Chairman Ben Bernanke said Wednesday that the central bank may begin to curtail its bond purchases later this year if it continues to see good data, markets went into a tailspin. Long-term interest rates spiked, interest-rate futures contracts fell and the dollar rose, all suggesting that the central bank might hike rates sooner than expected.

On Friday, markets recouped some of their lost ground, with the Dow Jones Industrial Average and S&P 500 ending up 0.3%, while the Nasdaq slipped 0.2%.

Although Bernanke stressed that the Federal Reserve will not raise short-term interest rates until unemployment falls to at least 6.5%, and that any increases will be gradual, investors are already reallocating their investments in preparation for higher rates.

Bank stocks are poised to benefit, although a sudden and unexpected rise in interest rates could hurt banks that have a large securities portfolio. Interest rates and bond values move in opposite directions.

Still, if the interest rate rise is gradual, banks would benefit from a steeper yield curve. Regional banks in particular could do well.

Regional bank stocks tend to be focused on traditional banking activities of deposit taking and lending and therefore make the bulk of their income from the "spread" between interest rates paid on loans and the interest payable on deposits, also known as the net interest margin.

When rates rise, banks are typically able to charge more on their loans, but the interest rates payable on deposits tends to respond with a lag. So most banks are likely to see their spreads widen.

Among the large-cap regional banks, shares of BB&T (BBT - Get Report) and Comerica (CMA - Get Report) were the biggest gainers, rising 2.1% and 3.2% respectively.

Synovus (SNV) and United Bankshares (UBSI) were winners among the smaller regionals, gaining more than 3% each.

The big money center banks, in contrast, finished in the red. Shares of Bank of America (BAC) slipped 1.5%. Shares of Citigroup (C - Get Report) lost 2% and JPMorgan Chase (JPM - Get Report) dipped by 0.8%.
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
BBT $31.39 3.70%
C $37.40 6.90%
CMA $32.83 5.80%
JPM $56.98 7.40%
WFC $47.00 4.10%


Chart of I:DJI
DOW 15,888.51 +228.33 1.46%
S&P 500 1,849.72 +20.64 1.13%
NASDAQ 4,298.3630 +31.5260 0.74%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs