NEW YORK (Reuters) - U.S. bank shares rose on Monday, boosted by hopes that a government bailout plan due on Tuesday will spare shareholders and help troubled financial institutions rid their balance sheets of toxic assets.
The KBW Banks Index .BKX was up 2.57 percent. Shares of Bank of America Corp (BAC.N), the largest U.S. bank by assets, soared 12.7 percent to $6.91 in morning trading on the New York Stock Exchange after falling in recent days to their lowest level in 25 years. Citigroup Inc (C.N), the third-largest U.S. bank, was up 4.1 percent to $4.07.
“Investors seem to be feeling comfortable with the bank rescue plan”, said Bill Fitzpatrick, an analyst at Optique Capital Management.
But J.P.Morgan Chase & Co (JPM.N) shares fell 2 percent to $27.03. Analysts believe the second-largest U.S. bank — which appears to be in better shape than its peers — will not benefit as much from the bailout as its rivals.
“The market is trying to pick and choose the winners and losers of the bailout,” said Matt McCormick, portfolio manager and banking analyst, Bahl & Gaynor Investment Counsel.
Treasury Secretary Timothy Geithner is set to reveal on Tuesday how the Obama administration plans to use the $350 billion remaining in the $700 billion Troubled Asset Relief Program (TARP).
Obama’s team is turning its efforts to cleaning up toxic assets clogging the financial system. It is expected to propose a range of measures, including injecting fresh capital through further acquisitions of stakes in banks, buying up toxic assets, and protecting banks against losses on such assets.
Reporting by Juan Lagorio and Elinor Comlay; Editing by John Wallace