It seems that Uncle Sam via Treasury and via Congress is going to give the markets what they want.  TARP, TALF, Bad Bank, aggregation, accounting rule exceptions, and the rest.  If you were watching many of these huge banks with troubled stocks and troubled operations you might have thought that nationalization was imminent.  But the rally that came on the heels of developments on Thursday and Friday took some of these stocks up massively.

Fifth Third Bancorp (NASDAQ: FITB) soared 20% in pre-market action.  This is only a $3.00 stock now, but it has already gone up more than 100% from its 52-week low of $1.27.  Even with today’s gain, this is down almost 90% over the last year.

Bank of America Corporation (NYSE: BAC) is up 5% before the open at $6.45.  This stock hit $3.77 on Thursday at the peak of the panic selling.  But Ken Lewis and other insiders stepped up and bought stock.  And Lewis also said in an interview that BAC did not need new capital and that nationalization has never been discussed by any of the regulators.  For this one to double on its own would only require a $7.54 price tag.  At $6.45, that may just be one upgrade or positive note away.

Citigroup, Inc. (NYSE: C) is  up 4% at $4.07.  We know about the break-up, the reorganization, and much more.  What is the real value?  No one seems to know and it is believed to be the most leveraged of the money centers.  Nonetheless, with a $2.80 low this one only has to hit $5.60 for it to be a double off of lows.

PNC Financial Services Group Inc. (NYSE: PNC) said last week that its acquisition of National City Corp. caused a huge loss.  The stock was pounded from highs to where the stock was down almost 80%.  At $32.57, this stock has to add about $10.00 to $42.62 for its stock to be a double off of lows.

And on the custodial side?  State Street Corp. (NYSE: STT) is still way down from highs by almost two-thirds.  But State Street stock has already more than doubled off its $14.43 low with shares at $30.80 this morning.  The Bank of New York Mellon Corporation (NYSE: BK) is almost there. At $28.37 this morning, this one only needs to hit $30.88 for it to be a double off of the $15.44 lows.

JP Morgan Chase (NYSE: JPM) was also pounded with the sector, but this is the default bank for “safe bank traders”…. Jamie Dimon keeps saying he didn’t even want the TARP money and doesn’t need it.  With shares down almost 3% at $26.90 this morning shares would have to go to $35.40 for these to have doubled off the recent lows.

Much of this still depends on what Tim Geithner’s plan (now for Tuesday rather than today ) will  be. The market is accepting a one-day delay better than what we might have suspected, but further delays would likely allow the sellers to show how troubled banks are also troubled stocks.
Jon C. Ogg
February 9, 2009

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