- The Washington Times - Monday, April 13, 2009

NEW YORK (AP) - Several bank shares bucked the broader market Monday and plowed higher as investors placed bets on which ones might report better-than-expected earnings in the coming weeks. After markets closed, Goldman Sachs Group Inc. said it earned $1.66 billion in the first three months of the year, beating Wall Street’s expectations.

The KBW Bank Index, which tracks 24 of the nation’s largest banks, rose 7.9 percent. Citigroup Inc. and Bank of America Corp. shares led the gains among large lenders, rising 25 percent and 15 percent respectively.

Analysts said much of the buying was fueled by investors trying to determine which other banks could be the next Wells Fargo & Co., which wowed the market on Thursday when it said it expects to report a record quarterly profit for the first quarter.

The surprise announcement buoyed bank stocks and helped send the overall market sharply higher ahead of a long weekend. Markets were closed for Good Friday.

On Monday, Goldman Sachs kicked off the banks’ earnings reports, releasing its results a day earlier than expected. Its $3.39-per-share profit strongly beat analysts’ estimates of $1.64 a share. The bank also said it planned a $5 billion stock offering. In after-hours trading Goldman shares slipped 1.7 percent.

“People are looking for the biggest opportunity out there,” said Keith Springer, president of Capital Financial Advisory Services, a Sacramento, Calif.-based wealth manager. “(Traders) are looking for the next shock. Who is going to shock again and surprise us with a great number?”

Analysts also attributed some of the buying to “short covering,” or the buying of stocks to cover misplaced bets that banks would fall when they post results this week. Short covering has played a large role in the surge in bank stocks over the past few weeks.

Citigroup shares were also boosted by a report that the bank is considering selling its Japanese banking units. Japanese news service Kyodo News said Monday that Citi is considering a sale of Nikko Citigroup Ltd. along with brokerage Nikko Cordial Securities and Nikko Asset Management.

In January, Citigroup reorganized itself into two entities, Citicorp and Citi Holdings. The first is focused on traditional banking around the world, and includes Nikko Citigroup. The second holds the company’s riskier assets and tougher-to-manage non-core ventures, including Nikko Cordial. It has been speculated that Citigroup would shed Nikko Cordial as part of its restructuring, but this is the first the Japanese retail bank has been mentioned.

Citigroup spokesman Mike Hanretta declined to comment on the report.

Citi shares rose 76 cents, or 25 percent, to close at $3.80. Bank of America rose $1.47, or 15.4 percent, to $11.02.

Investors are extremely anxious ahead of banks’ first-quarter earnings reports, hoping for signs of improvement during the quarter. Reports from Citigroup and JPMorgan Chase & Co. plan to report this week.

Over the past month, bank stocks have led the market higher, helping the major indexes stage their biggest four-week rally in more than 75 years. The surge was driven in part by encouraging announcements from several big bank CEOs that they were having a better quarter than most expected _ which helped fuel hopes for an economic recovery. Many hinge the end of the recession on the restoration of the nation’s banking system.

But a handful of pessimistic forecasts about potential loan losses began to surface, jolting investors’ newfound confidence. Wells Fargo, however, helped to solidify investors’ hopes that huge spikes in revenue will help offset rising loan losses. Wells Fargo shares edged up 6 cents to $19.67 after surging 32 percent on Thursday.

On Monday, Rochdale Securities analyst Richard Bove started coverage of JPMorgan with a “Buy” rating, noting solid earnings potential. Though loan losses will likely remain elevated through 2011, the rate of growth of losses should slow, Bove said. At the same time, the bank’s deposits and net interest income are growing at a fast clip.

JPMorgan added 95 cents, or 2.9 percent, to $33.70.

Regional banks also posted big gains on Monday. Huntington Bancshares Inc. soared 71 cents, or 33 percent, to $2.86, while Fifth Third Bancorp rose 76 cents, or 21.2 percent, to $4.34. Regions Financial Corp. added 72 cents, or 16.7 percent, to $5.03, while KeyCorp rose 98 cents, or 11.9 percent, to $9.23.

PNC Financial Services Group Inc. rose $1.82, or 4.7 percent, to $40.30, while U.S. Bancorp rose 37 cents to $18.01.

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