Wednesday's Financial Winners & Losers

The sector was flat Wednesday, despite Fed chief Ben Bernanke's dreary forecast.
By Debra Borchardt ,

Shares of

KeyCorp

(KEY) - Get Report

jumped on talk of a deal with fellow beleaguered regional bank

National City

(NCC)

on what was an overall mixed day of trading for financial stocks.

National City had said Tuesday that it hired New York investment bank Goldman Sachs to look into strategic alternatives. National City has been shopping itself over the last six months as it struggles to address its exposure to the subprime crisis.

The Wall Street Journal

reported that KeyCorp was the latest name to have surfaced as a potential acquirer. Key shares were up 3.6% to $24.34, while Nat City plunged 7.7% to $9.22.

After Tuesday's rally, the market largely shrugged off

Federal Reserve

Chairman Ben Bernanke's pessimistic testimony before the Joint Economic Committee of Congress. The chairman warned Congress that a recession was possible. The

NYSE

Financial Sector Index closed down less than a point to 7,678.20.

Bond insurers seemed to be reacting positively to Bernanke's testimony, with both

Ambac Financial

(ABK)

and

MBIA

(MBI) - Get Report

moving up. Ambac shares climbed as much as 5.1%, but then settled up 8 cents at the close to $6.19, while MBIA stock was climbing 2.1% to $13.76.

Shares of

Fifth Third Bancorp

(FITB) - Get Report

initially jumped higher Wednesday after a Morgan Keegan analyst upgraded the stock, saying the bank has shored up its balance sheet and the shares do not have much more to fall. The analyst pointed out that Fifth Third had sold $1 billion in bonds, cashed in on a stake in

Visa

(V) - Get Report

and packed $815 million in car loans into bonds, thus freeing up a lot of money. The bank climbed as high as $1.15, but closed up 14 cents to $22.63.

Credit company

CIT Group

(CIT) - Get Report

soared as various rumors surfaced about the company ranging from a potential buyout to asset sales. The stock jumped to $15.49 at one point, but pulled back to $14.15, a move of 9.1%.

Elsewhere, a Friedman Billings Ramsey analyst wrote in a research note that banks with a rapidly increasing non-performing asset to risk-based capital ratio will likely experience the scrutiny of regulators. His comments sent banks like

Bank of New York Mellon

(BK) - Get Report

sliding 4.8% to $42 and

Bank of America

(BAC) - Get Report

down 56 cents to $40.30.

Also dropping in afternoon trading was

Merrill Lynch

(MER)

after

CNBC

reported that the company was planning to layoff 10% to 15% of its workforce. The investment bank was declining 56 cents to $45.34, while fellow broker

Lehman Brothers

(LEH)

ticked down 27 cents to $44.07. Lehman is expected to cut 10% of its workforce instead of the 5% that was initially expected.

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