Magazine article American Banker

Bank Issues Lag Behind a Charged-Up Market

Magazine article American Banker

Bank Issues Lag Behind a Charged-Up Market

Article excerpt

The banking sector slept through Wednesday's rally in the overall stock market.

"The banks ceased to be the clear leaders in price performance," said Judah Kraushaar, chief bank analyst at Merrill Lynch & Co.

John A. Heffern, an analyst at Alex. Brown & Sons, said a handful of banks gained on Wednesday but the sector is not keeping up with the overall market.

"Beginning with second-quarter earnings releases, banks were selling off," he said. "The market has bounced back, but banks are still underperforming."

NationsBank Corp., Charlotte, N.C., was up 37.5 cents to $46.375, posting a gain for the second straight day. Fifth Third Bancorp, Cincinnati, was up $2.875, to $49.375; and Core-States Financial Corp., Philadelphia, was up $1, to $50.75.

But these gains were exceptions on a day when most banks lagged far behind the Dow Jones industrial average, which rose 45.12 points, or 1.35%, to 3,379.19.

Some bank stocks even declined. Wachovia Corp. was off 87.5 cents, to $62.25, and Bank-America Corp. dropped 75 cents, to $45.

Mr. Kraushaar said it was "somewhat surprising" that banks would lag in a rally driven by declines in long-term interest rates.

"When the cost of capital comes down 50 basis points in a short time, that ought to have positive" implications for bank earnings, he said.

But after an 18-month rally, bank stock prices may already reflect the assumption that rates will fall, he added.

Others said some bank investors may be focusing on the economic weakness that underlies the bond rally, rather than on rate expectations. …

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