Financial Winners and Losers: BofA

(Updated with final stock price moves throughout)

Financial stocks finished mostly higher Wednesday, after Bank of America ( BAC) was added to Citigroup's ( C) list of aggressive growth stocks.

In a research note, Citigroup analyst Keith Horowitz said that any uncertainty created as Bank of America completes its capital raising efforts will provide a good buying opportunity to own a "quality franchise with significant long-term earnings power." Bank of America has raised nearly $33 billion of the $33.9 billion required from the government stress test.

"We believe as Bank of America concludes its preferred conversions and capital plan, a major overhang on the stock will be lifted and investor focus will shift towards its solid long-term normalized earnings potential, which we expect will be achievable beginning in 2012."

That news overshadowed reports that BofA's asset-management unit was receiving lukewarm response from potential buyers. The Financial Times reported that BofA's Columbia Management unit isn't garnering the amount of interest the bank expected, with bids coming in around $2 billion, far less than the $3 billion BofA expected to get for the business.

In other bank news, Citigroup sharply increased the interest rates on as many as 15 million credit cards, a move that could spark political backlash as legislators attempt to curb consumer lending abuses, especially at banks that received bailout funds.

Citi has raised its credit card rates on between 13 million and 15 million co-branded credit cards, The Financial Times reported Wednesday, citing people close to the situation.

Meanwhile, Nomura Holdings ( NMR) will pay 19 billion yen ($197 million) to buy Citigroup's Japanese trust banking subsidiary NikkoCiti Trust and Banking Corp. The sale is expected to close in the fourth quarter, NikkoCiti said in a statement Wednesday.

Elsewhere, Morgan Stanley ( MS) and Mitsubishi UFJ ( MTU) announced a loan marketing joint venture and other initiatives, building on an existing relationship. The joint venture will be capitalized at $500,000, the companies said.

Freddie Mac ( FRE) was also in focus after The Wall Street Journal reported that Charles Haldeman, who stepped down Tuesday as an executive at Boston mutual fund company Putnam, is the prime candidate for CEO spot.

BofA shares ended down 1.1% at $13.05, and Morgan Stanley slipped 0.5% to $28.36. Citigroup finished flat at $2.97. Meanwhile, Mitsubishi UFJ climbed 2.4% to $6.29, and Freddie Mac was up 3.2% to close at 64 cents.

KeyCorp ( KEY) shares were also among the losers after the bank said recent exchange offers generated approximately $540 million of additional Tier 1 common equity toward fulfillment of the $1.8 billion capital buffer that the company was required to raise under the government's stress tests.

Together with the $1.3 billion of Tier 1 common equity previously raised by KeyCorp following receipt of the stress test results, KeyCorp said it believes that it has now satisfied the government's requirements. The company has generated total Tier 1 common equity capital in excess of $1.8 billion. KeyCorp shares closed down 8 cents, or 1.5%, to $5.16.

In bank-related news, The Wall Street Journal reported that the Federal Deposit Insurance Corp. is expected Thursday to propose new guidelines for private-equity investors seeking to buy failed banks, people familiar with the matter said. The FDIC's proposal isn't final and could change before it's issued for public comment, the report said.

Meanwhile, Moody's Investors Service released a report that said despite the significant amounts of capital that have flowed into the U.S. banking system in recent months, the only short-term positive rating actions on U.S. banks are likely to be outlook changes, from negative to stable or to positive.

"The potential for upgrades is unlikely until 2010 without strong evidence of a sustained economic recovery," the report said, adding that "clear statements and actions from bank managements regarding the levels of capital they plan to maintain" would also be required.

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