This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Bank Stocks Hit Multi-year Highs on Fed, Dividend Hopes

Stocks in this article: BAC JPM WFC C

NEW YORK (TheStreet) --U.S. bank stocks continued surging Thursday on what analysts said was continued optimism over a reduction in the Federal Reserve's bond buying program and expectations of imminent dividend hikes and share buyback announcements.

Bank of America shares were up 1.89% to $17.77. JPMorgan shares were higher by 2.42% to $59.77. Wells Fargo shares were up 1.79% to $48.67 and Citigroup shares were up 2.1% to $49.97. All of those banks except Citigroup hit new multi-year highs.

"People want to buy banks of the basis that they will benefit from rising rates at some point in time," said Atlantic Equities analyst Richard Staite in an interview Thursday.

Rising interest rates allow banks to earn more money in their bread and butter business of borrowing short and lending long. What's more, it takes depositors a long time to demand higher interest rates on their money, so banks can put that money to work either by investing it or lending it out at no cost.

Rates are expected to rise because the Fed, under new chairwoman Janet Yellen announced it would cut back its monthly purchases of Treasury bonds and mortgage-backed securities by $10 billion--to $55 billion.

Another factor may be the expectation that banks will gain approval to raise dividends and buy back shares, argues Rafferty Capital Markets analyst Dick Bove, also interviewed Thursday. The Federal Reserve will announce the results of its annual "stress tests" Thursday, while on March 26 banks will be able to raise dividends and buy back shares following the Fed's review of their plans to do so, known as the Comprehensive Capital Analysis and Review.


In the case of Bank of America, for example, Bove believes it will rise to at least 5 cents per quarter from its current level of a penny. He also believes $500 million worth of buybacks for the bank "would not be unexpected."

Bove has never been a fan of buybacks as he believes banks always buy back shares at exactly the wrong time.

"I think they're terrible. I think banks should never do them. But in terms of thinking about whether the stock is going to react favorably or negatively to buybacks, it always reacts favorably," the analyst said. "Everybody disagrees with me and I sit over in the idiot corner."

--Written by Dan Freed in New York

Follow @dan_freed


Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs