Regional Banks Rise: Financial Winners

NEW YORK ( TheStreet) -- Zions Bancorporation ( ZION) was the winner among large U.S. financials, with shares rising 6% to close at $17.98, with the Salt Lake City lender scheduled to report its third-quarter financial results after the market close.

The broad indexes were strong, with strength in tech names, a stellar earnings report from Caterpillar ( CAT), and a number of announcements, including Cigna's ( CI) deal to acquire HealthSpring ( HS) for $3.8 billion, and, Oracle's ( ORCL) $1.43 billion buyout of RightNow Technologies ( RNOW).

Banking names were helped by the announcement from the Federal Housing Finance Agency that government-sponsored mortgage giants Fannie Mae ( FNMA) and Freddie Mac ( FMCC) would expand their Home Affordable Refinance Program, or HARP, program to make it easier for some borrowers to refinance "underwater" mortgage loans.

The KBW Bank Index ( I:BKX) rose 3'5 to close at 40.05, with all 24 index components rising for the session, except for First Niagara Financial Group ( FNFG), which was down 3% to close at $8.64.

First Niagara is looking to complete its deal to acquire 195 branches in Upstate New York and Connecticut from HSBC ( HBC) early next year, after which the company will need to sell roughly 100 of the acquired branches to settle anticompetitive concern of the Justice Department. The company expects to raise between $750 million and $800 million in common equity before closing on the HSBC deal.

Following First Niagara's third-quarter earnings release, Guggenheim Securities analyst David Darst on Thursday pointed out that the company's shareholders faced increasing dilution from the capital raise, because the shares had dropped 26% since the HSBC deal was announced in July.

The analyst maintained his neutral rating on First Niagara's shares, while lowering his 12-month price target by a dollar to $9.50, saying that "based on management commentary of the integration process, we think FNFG moves forward with the deal; however, the final branch size and capital structure could change as has the expected accretion/return."

SunTrust ( STI) saw its shares rise nearly 6% to close at $19.62. Following the Atlanta lender's third-quarter earnings announcement on Friday, FIG Partners analyst Christopher Marinac reiterated his "Outperform" rating for SunTrust, with a $22.60 price target, saying "we continue to recommend STI shares and will bite our tongues in doing so since we must be patient for the eventual drop in operating expenses that management promises... AND we feel strongly that higher cash dividends and some share repurchases are likely by Spring 2012."

Huntington Bancshares ( HBAN) saw its stock rise 5.5% to close at $5.17. On Friday, Guggenheim Securities analyst Jeff Davis reiterated his "Buy" rating for Huntington, with a price target of $6.00, saying that the company's "loan growth the past few quarters has been sufficient to cause net interest income to increase slightly as the net interest margin has narrowed," and that "management highlighted the strong growth the company has realized in retail and, to a lesser extent, commercial transaction accounts as evidence its "fair play" pricing models are gaining market share."

Shares of Capital One ( COF) rose 5% to close at $43.29.

Large U.S. banks seeing 4% gains on Monday included Bank of America ( BAC), which closed at $6.72; Citigroup ( C), at $31.60; and Regions Financial ( RF), closing at $3.92.


-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.