A December to Remember for Banks

Talk about a December to remember....

Shareholders of bank stocks will be grinning like the Cheshire Cat after banks have had a tremendous month. In fact, rising 17% in December, the KBW Bank Index is on pace for its best month since March 2000.

Helping fuel the rally has been a flurry of bank M&A this month, improving economic data, and also hopes of dividend increases next year.

Recall some of the deals that happened or were talked about this month:

  1. Bank of Montreal buying Marshall & Illsley
  2. Hancock Holding acquiring Whitney Holding
  3. Chatter that PNC Financial was looking at Regions Financial and BankAtlantic to increase its presence in Florida

Also, as our Bob Pisani noted at the beginning of this month (before much of the bank rally had occurred),there’s much anticipation that banks could be the recovery story in 2011.

So how has the strong outperformance this month helped the stock performance of banks this year?

At the end of November, the KBW Bank Index was up just 4.8% in 2010 - underperforming the S&P 500, which had a 5.9% gain on the year up until that point. With this month’s gain though, the KBW Bank Index has soared 22.6% this year – far outperforming the S&P 500, which is now up 12.9% in 2010.

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