Banks Jump as Yields Climb, Data Beats, Political Tensions Ease

(Bloomberg) -- Bank stocks surged the most since January on Thursday, buoyed by the yield on 10-year Treasuries rising toward 1.6%, strong private payrolls data and an agreement between China and the U.S. to hold trade talks next month.

The KBW bank index rallied as much as 3.6%, the most intraday since Jan. 4, to the highest since Aug. 5. Top gainers included trust bank State Street Corp., with a 4.9% gain; interest-rate-sensitive Silicon Valley lender SVB Financial Group., up as much as 4.8%, amd regional banks Regions Financial Corp, KeyCorp and Comerica Inc.

Big banks Citigroup Inc. and Bank of America Corp. were also among top gainers, with internationally-exposed Citi soaring as much as 4.7% and bellwether BofA up 4.1%.

Banks have been underperforming in recent months, with the KBW index down about 2.7% since the end of the last quarter, versus a gain for the S&P 500 of 1.2%.

Earlier, Baird’s David George said bank stocks may be “due for a bounce,” as shares are mostly pricing in the likelihood of earnings estimate cuts due to lower rates. George also flagged sector underperformance, noted many stocks are trading near tangible book value per share, while offering 4%-5% dividend yields, and called mortgages the “the silver lining of lower rates.”

Read more: Bank Stocks ‘Due for a Bounce’ After Summer Burn, Baird Says

Bank investors will be watching the annual Barclays financial services conference next week. The estimate bias for banks’ third-quarter earnings-per-share has “typically been lower” after the firm’s conference, and this year should be “no different,” given the change to the interest rate backdrop since second-quarter earnings conference calls, Barclays analyst Jason Goldberg wrote in a note on Wednesday.

To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm

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