Bank Stocks Outperformed in 2010: Which Will Raise Dividends First in 2011?

In their fashion, bank stocks performed remarkably well in 2010, outperforming all the major indexes. The KBW Bank Index (BKX) ended at 52.21, +22.2% higher and handily outperforming the Nasdaq (+16.9%), S&P500 (+12.8%), and DJIA (11.0%). The BKX fell -3.63% and -50.0% in 2009 and 2008, respectively. That bank stocks outperformed isn’t surprising. Having fallen farther, bank stocks had more catching up to do. But fundamentals clearly improved. Banks recapitalized. Credit cost fell, and earnings grew. The yield curve was consecutively steep, flatter, then steep again at year-end. But for the President’s unfortunate “fat cat” rhetoric in late 2009, the SEC’s regulatory attack on Goldman Sachs in April, and the Congress’ mid-year “reform” of the financial industry, no doubt financial stocks would have done even better. While the major indexes sport 2-year highs and have recovered to pre-Lehman levels, the BKX stands -9.91% below its best 2010 level (57.95 on April 23rd) and -36.8% below its pre-Lehman levels.... Read more