Much of the financial sector is lit up bright green, continuing to outperform following yesterday's suggestion by the FOMC and Janet Yellen that rate hikes could come sooner than expected. XLF +1.1%, KBE +1.6%, KRE +1.6%.
At new 52-week or even multi-year highs are JPMorgan (JPM +2.3%), Wells Fargo (WFC +1.7%), Morgan Stanley (MS +1.4%), and Bank of America (BAC +1.6%).
Regional lenders: U.S. Bancorp (USB +1%), Huntington (HBAN +1.5%), PNC (PNC +1.3%), BB&T (BBT +1.5%), Fifth Third (FITB +1.8%), First Niagara (FNFG +2.1%).
Leading among the life insurers are Lincoln National (LNC +1.9%), Protective Life (PL +1.6%), Manulife (MFC +1.2%), and Sun Life (SLF +1.1%).
Liquidity is becoming an issue at many community and regional banks, says Sterne Agee's Matthew Kelley, noting growing loan-to-deposit ratios. Bank runs are not the worry, but keeping loan pipelines well funded is, and a number of smaller players could be acquisition targets for lenders looking to boost deposits.
Kelley's list of 12 possibilities in the Northeast: Westfield Financial (WFD +0.1%), Century Bancorp (CNBKA -0.9%), Hudson Valley Holding (HVB +0.1%), Republic First (FRBK +1%), Metro Bancorp (METR +0.4%), Suffolk Bancorp (SUBK +3.3%), Citizens and Northern (CZNC +0.3%), Sun Bancorp (SNBC), First Niagara (FNFG +1.7%), Orrstown Financial (ORRF +0.4%), Camden National (CAC +0.5%), Cambridge Bancorp (CATC +0.2%).
Under pressure to raise deposits? Susquehanna Bancshares (SUSQ -0.6%) - whose loan-to-deposit ratio rose to 105.5% in Q4 from 102.5% a year earlier. Investors Bancorp (ISBC) with a ratio of 120%, New York Community Bancorp (NYCB), Astoria Financial (AF +0.8%), and People's United (PBCT +0.2%).
RBC Capital says to "buy the dip" on First Niagara (FNFG -2.2%) after its post-earnings implosion on Friday, but not so fast, say another of other sell-siders.
"Higher operating expenses ... will not be matched by revenue growth," says FBR, removing its Buy rating on the stock. "We consider the 4-5 year time line to achieve FNFG's ROA target of 115 bps-125 bps ROA too long."
Jefferies too throws in the towel on its Buy rating. "Our Buy thesis rested on estimate stability via cost discipline and a long-term ROA improvement via balance sheet rotation, but both themes are no longer valid given elevated infrastructure investments ($250mm over next three years) and a slower loan growth forecast."
KBW removes its Buy rating as well and Macquarie downgrades to Sell.
Buy the dip in First Niagara (FNFG), says RBC Capital, following Friday's 12.2% post-earnings plunge. The report was about inline, but the market overreacted to the bank's announcement of higher investments in technology which is sure to hit profitability in the near-term.
RBC keeps its Outperform rating, but lowers the price target by $1 to $11.
It's a financial crisis-type move for First Niagara Financial (FNFG -9.7%) after its Q4 earnings report as the bank guides for 2014 operating EPS of $0.72-$0.75 vs. expectations of $0.79.
"We've been underperforming," (no longer interim) CEO Gary Crosby tells analysts. "A combination of higher staffing to execute projects and to operate the new product and service platforms, as well as higher technology and depreciation expenses and professional fees," will likely see expenses on the rise this year.