Bank Stocks Get Lift On Meredith and Others Bullish Vibe (XLF, FAZ, FAS)

July 13, 2009 9:05 AM EDT
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Price: $350.83 +1.80%

Rating Summary:
    22 Buy, 17 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 16 | Down: 24 | New: 55
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Banks stocks are higher this AM after uber-bearish banking analyst Meredith Whitney upgraded Goldman Sachs (NYSE: GS) to Buy, just one day ahead of the company's earnings. In addition, Goldman themselves had comments this morning that is adding to the upside. The firm said they expect investors to focus more on pre-provision earnings and less on credit.

Goldman prefers large banks over regional banks and favors JP Morgan (NYSE: JPM) (Buy) into the quarter. Goldman added Discover Financial Services (NYSE: DFS) to its Conviction Buy List, removing The Bank of New York Mellon Corporation (NYSE: BK). The firm has an Attractive coverage view on Trust banks.

Goldman also raised its price target on Wells Fargo (NYSE: WFC) to $29 from $14 (Neutral) and PNC Financial (NYSE: PNC) to $38 from $28 (Neutral).

Goldman sees consumer getting better and commercial getting worse, which disproportionally impacts regional banks. They also said capital markets and mortgages should be big in 2Q, which also favors large banks versus regionals. Capital has improved due to capital raises and deposit growth. Goldman said TARP repayment and FDIC expense will make consensus EPS a difficult comp as changes are treated inconsistently across the street.

The main sector ETF Financial Select Sector SPDR (NYSE: XLF) is up 2% this AM on the positive vibe. On the leveraged ETF front, Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) is down 5% and Direxion Daily Financial Bull 3X Shares (NYSE: FAS) is up 5%.

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