Bank Stocks Trade Up in the Wake of the Volcker Rule

Regulation, schmegulation. The long-talked-about Volcker Rule has been approved, a big chunk of legislation prohibiting federally insured banks from proprietary trading in most classes of securities. After all the concern and debate about the rule's impact on the nation's top financials, it seems investors are relieved the thing isn't more stringent and restrictive. Most of the big four banks are trading in positive territory late this afternoon, in contrast to the sinking Dow.

What helps is that consumers are getting warmer about the nation's major financials. The American Customer Satisfaction Index, which tracks such sentiment, released its latest national survey earlier this week. Compared to the previous poll, overall satisfaction with retail banks crept up by 1.3% to 70 out of a possible 100.

The top players all did well in the survey, improving their scores on a sequential basis. JPMorgan Chase (NYSE: JPM  ) remained in the No. 1 spot, padding its lead with a 3% gain to 76. Citigroup (NYSE: C  ) added even more -- 6%, to 74 -- and Wells Fargo (NYSE: WFC  ) also increased its score, by 1% to 72. Bank of America (NYSE: BAC  ) was the Gang of Four's laggard. However, it registered its best improvement in a decade by advancing at a 5% clip to 69.

Going by those numbers and the stock performance of those companies today, it seems that few investors are spooked by the latest flurry of legal woes in the sector. If JPMorgan Chase were in a Hollywood movie, it would be clad entirely in black, sport a twirly mustache, and do the evil cackle while strapping the heroine to a set of train tracks. Yes, it's the regulator's favorite bad guy; this week the transgression, according to the Department of Justice, is the bank's lack of adequate caution about Bernard Madoff.

Apparently, it didn't issue a formal report in the U.S. about such concerns, despite having done so in the United Kingdom. According to the various news sources reporting on the situation,  JPMorgan Chase faces penalties of $1 billion to $2 billion for the oversight.

At least the bank is in good company. Bank of America will also have to dig into its wallet for the activities of its Merrill Lynch investment banking arm. The firm is to cough up nearly $132 million in a settlement with the Securities and Exchange Commission over Merrill's disclosures about mortgage securities during the financial crisis.  

Citigroup and Wells Fargo both seem to be taking a breather from going to court and negotiating fines with regulators. Citi has set the date for the release of its Q4 results; this is to take place on January 16. The bank's also making headlines in a positive way in terms of its alumni, with media reports saying that ex-Vice Chairman (not to mention vice chairman of the International Monetary Fund, and head of the Bank of Israel) Stanley Fischer is apparently President Obama's top choice for the vice chairman spot at the Federal Reserve, the No. 2 job behind presumed honcho-to-be Janet Yellen.

Wells Fargo, meanwhile, continues to make a healthy push to expand business segments not associated with its bread-and-butter of mortgages. Today, the company announced that it has reached the first phase of an agreement for its Visa credit card holders to link with mobile payment system Isis. Still in its early days, Isis is backed by several telecom heavyweights -- it's a joint venture between units of AT&T, T-Mobile USA, and Verizon -- and associating with it should add to the appeal of those Wells Fargo-issued cards.

All in all, the news for banks is good today and their share prices are reflecting that. What's a little more regulation and a few more fines in a sector already so accustomed to such challenges? 


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