US SMALL/MIDCAPS-Mid-cap financials outperform bigger banks

NEW YORK, March 18 (Reuters) - Mid-capitalization financials have risen nearly 3 percent this week and outperformed larger rivals despite plans in Washington to reform the banking industry.

President Barack Obama's administration has been pushing to overhaul bank regulation, a plan that's seen as one of the major headwinds for the broader stock market this year. For a poll and story on strategists' outlook for stocks this year, see [ID:nLDE62G1AQ]

But legislation unveiled on Monday by Sen. Christopher Dodd would have the greatest impact on large banks and Mid-capitalization banks are seen less affected. Their shares have also gained on signs of recovery in the financial sector and wider economy. For reform factbox, see [ID:nN16251281].

"It was having a much bigger impact on the large caps, stocks like Goldman (GS.N)," said Edward Hemmelgarn, founder, president, and chief investment officer of Shaker Investments in Cleveland. Goldman is up 1.4 percent for the week so far.

"I don't think it's going to change things much for regional banks," he said. They are benefitting instead from investors' view that "it's safe to get back" into the sector.

The S&P 500 financial index .GSPF is up just 1.8 percent so far this week whereas the mid-cap financial index .4GSPF is 2.8 percent higher over the same period. On Thursday, Fidelity National Financial (FNF.N), rose 1.2 percent to $14.93 and was among stocks helping the mid-cap market.

The small-cap financial index .6GSPF was up just 1.5 percent for the week.

Small- and mid-cap stocks have outperformed the broader stock market for several weeks now amid views the economy is strengthening. Smaller and mid-cap markets tend to gain ahead of larger-cap ones following an economic downturn.

Among other individual financials stocks, Sandy Spring Bancorp (SASR.O) was down 6 percent on Thursday at $14.02 as the company said it increased the size of its share offering by about 6 percent and priced it at $13.50 per share. [D:nSGE62H0FG]

The S&P MidCap 400 index .MID dipped 0.4 percent while the S&P SmallCap 600 index .SML eased 0.3 percent. In comparison, the benchmark S&P 500 .SPX ended down 0.03 percent.

(Editing by Andrew Hay)