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The tenuous relief rally comes at a difficult time for the banking sector that has been grappling with worries around deposit flight, rising interest rates and exposure to commercial real estate since March.
The S&P 500 Banks index advanced about 2.3%. In comparison, the benchmark S&P 500 index was last up 0.2%.
Big banks such as JPMorgan Chase & Co (NYSE:JPM), Wells Fargo (NYSE:WFC) & Co, Goldman Sachs Group Inc (NYSE:GS), Morgan Stanley (NYSE:MS), Citigroup (NYSE:C), and Bank of America Corp (NYSE:BAC) rose between 0.7% and 2.9%.
Regional lenders were also higher, with PacWest Bancorp, Western Alliance (NYSE:WAL), Zions Bancorp, Comerica (NYSE:CMA), M&T Bank Corp (NYSE:MTB) and KeyCorp (NYSE:KEY) rising between 4.9% and 8.5%.
The volatility in shares of regional lenders has underscored ongoing investor uncertainty over the health of the sector, with the KBW Regional Banking index losing roughly 22% so far this year.
Bank stocks fell on Monday, with some investors pointing to worries that a flood of Treasury bill issuance following the raising of the U.S. debt ceiling would drain liquidity from lenders.
U.S. banks could also face capital hikes of as much as 20% under new rules being prepared by U.S. regulators as part of a global effort to harmonize capital requirements, Reuters reported on Monday, citing a person familiar with the matter.
