Bank Reform Bill Takes Another Small Step - TheStreet

NEW YORK (

TheStreet

) -- Congress took another small step toward passing its long-awaited financial reform legislation on Wednesday with the bill winning a procedural test vote in the House of Representatives, according to a

Reuters

report.

The report said the House could hold a final vote on the Wall Street Reform and Consumer Protection Act as soon as tonight, although the Senate won't vote until the mid-July.

The House and Senate conference committee hammered out a compromise version of their two separate proposals on Friday, and most financial stocks rallied in response, as the legislation, which places limits on derivatives and proprietary trading activities by big banks and creates a Consumer Protection Agency among other provisions, was for the most part viewed as less punitive than it could have been.

The passing of Senator Robert Byrd (D., W. Va.) on Monday, along with complaints from two Republican Senators about the late inclusion of an estimated $19 billion tax on the big banks, complicated the path of passage for the legislation earlier this week, leading to

the tax being removed

in favor of an early termination of the Troubled Assets Relief Program.

The bank stocks fell sharply Tuesday along with the broad market, and the group was mostly lower again in Wednesday's session. The action in the money-center names was mixed to negative with

Citigroup

(C) - Get Report

finishing up 3 cents at $3.76; but

Bank of America

(BAC) - Get Report

losing 20 cents to $14.37;

JPMorgan Chase

(JPM) - Get Report

ending down 45 cents at $36.61; and

Wells Fargo

(WFC) - Get Report

, closing off 33 cents at $25.60.

The big investment banks,

Goldman Sachs

(GS) - Get Report

and

Morgan Stanley

(MS) - Get Report

, both fell incrementally.

FBR Capital Markets issued a research note early Wednesday suggesting investors buy the big banks ahead of second-quarter reporting season, which will kick off on July 15 when JPMorgan releases its numbers. The firm expects bank management teams providing commentary on how they anticipate finreg affecting their respective bottom lines will ultimately be a positive, removing the uncertainty that's held back the stocks of late.

"While we remain cautious on the space longer term given our expectation of continued ROE

return on equity pressure from elevated credit costs in the residential mortgage portfolio, and from legislative and regulatory changes, we believe any attempt to quantify the impact of the financial reform bill could drive a relief rally in the space," FBR Capital said in the note. "

Especially at the largest banks that have seen the greatest stock declines, as they are most impacted by the bill."

As part of its call, FBR Capital analysts upgraded

U.S. Bancorp

, and listed their favorite bank stocks as

PNC

(PNC) - Get Report

, JPMorgan, U.S. Bancorp, and Bank of America in that order.

--

Written by Michael Baron in New York

.