April 24, 2009

Bank stocks were mixed Thursday as investors anxiously awaited more details on the government's stress tests of the nation's largest banks.The Federal Reserve is expected to detail its methodology for the tests on Friday and release the test results May 4.With all the major banks having reported first-quarter earnings - which came in mostly better than expected - all eyes are now on the stress tests, which are designed to determine which banks are healthy, which need more capital, and which might fail if the recession worsens.Investors are worried that the results might reveal more pain in the industry than feared.

Details of the tests could easily rattle a market that has become more upbeat over the past several weeks, driven by the hope that the economy was beginning to improve, or at the very least, not worsening.Treasury Secretary Timothy Geithner told a congressional panel earlier this week that the "vast majority" of banks have more capital than they need. But analysts warn that banks deemed to be weak could suffer at the hands of investors.Rochdale Securities analyst Richard Bove expressed concern that the stress tests are putting unnecessary pressure on the banks.Bove said it's likely that the stress tests will force banks to raise a significant amount of new funds, but current market conditions make that a very difficult task.