Banks: Cloture Passes; Handicapping the Result

With Dow Jones Newswires reporting the Senate could pass financial reform legislation today, various perspectives are emerging on the likely impact.

The stocks have been under pressure again all day, with the Select Sector SPDR Financials exchange-traded fund (ETF) down 33 cents, or 2.2%, at $14.61.

Rochedale Securities analyst Dick Bove this morning wrote in a note to clients that underwriters such as Lazard (LAZ), Jefferies Group (JEF), and Evercore Partners (EVR) will bear less of the pain of any new regulations, while those focused on consumer finance will be harder hit, such as SunTrust Banks (STI) and Regionals Financial (RF) and KeyCorp (KEY), according to a write-up by DJ’s Kerry Grace Benn. Bove wrote that bank stocks could fall another 10% to 12%� but are still good longer-term investments.

That contrasts with the view expressed by Collins Stewarts’s Todd Hagerman yesterday, in which he argued in favor of STI and RF as more desirable than the money-center banks.

FBR Capital analyst Paul Miller, meanwhile, writes this morning that the rejection of an amendment last night to allow states to limit interest on credit card purchases to the maximum allowable interest rate in the state. He expects card issuers Capital One Financial (COF), Discover Financial Services (DFS), American Express (AXP), and Visa (V) and MasterCard (MA) to respond positively.

On other matters, Miller notes that opposition is making it tough for the “Volcker Rule” to become attached to the legislation, though it’s still a threat; that the requirement that banks spin-off swaps/derivatives trading desks is unlikely to make it into a final bill; that some modifications to the capital requirements measure that has been weighing on banks makes this requirement possibly less onerous in its final form; and Maria Cantwell‘s (Dem., Washington) requirement for greater transparency on derivatives is gaining some support after the Senator made compromises on its language.

Update: The Senate just voted 60 to 40 a few minutes ago to end debate on the financial reform legislation and to send it to the Senate floor for a full vote.