NEW YORK (Reuters) – Wells Fargo and Co (WFC.N) on Thursday reported preliminary first quarter earnings of $3 billion, or about 55 cents per common share after preferred dividends, a stronger-than-expected result that sent the bank’s shares up 28 percent in premarket electronic trading.

The results also bolstered the overall sector, sending the Select Sector SPDR Financial ETF XLF.P 7.4 percent higher in premarket trading.

The following is reaction from industry analysts and investors:

WILLIAM SMITH, PRESIDENT OF SMITH ASSET MANAGEMENT INC, IN NEW YORK:

“There are good guys and bad guys, and we’re not talking about the bad players here. Not all banks are good, and this is going to start separating the good actors from the bad actors.”

“Still it’s positive and it should be good for the entire sector. The tide lifts all ships.”

CLEVELAND RUECKERT, MARKET ANALYST, BIRINYI ASSOCIATES INC. STAMFORD.

“It’s definitely been taken well by the market – it’s a very positive number. I’m not sure what the details are going to be but I suspect a lot of the stronger-than-expected earnings has to do with change in the accounting rules that were passed recently.

“Wells Fargo serves as good catalyst to get things going and hopefully we can have a fairly positive day.”

“I think so (this is mainly down to changes in mark-to-market rule). The market reacted very strongly to number that came across. I’m sure that number will be scrutinized through out the day to really figure out what’s going on there, because we’ve seen pretty significant discrepancies for actual earnings versus analysts estimates throughout this whole credit crisis so there’s obviously stuff going on there that the bank analysts weren’t aware of. We’ll have to see what the details are but on the surface it’s very positive.”

MICHAEL FARR, PRESIDENT, FARR, MILLER and WASHINGTON, IN WASHINGTON

“They have been growing and expanding share. And that’s what we had been saying that Wells Fargo would do and some of the stronger banks would do. They are probably one of the best positioned to expand and benefit from the particularly low mortgage rate environment. It’s a huge portion of their business. So they are seeing some gains.

“I don’t think that this is an all-clear for Wells Fargo because they have a considerable portfolio of loans on their books that are somewhat concerning. They have got a huge portfolio of home equity loans.

“The loans on the books are not getting the attention they deserve. It’s true for most of the financials right now.

“It’s a very solid operator. But with that huge portfolio of home equity loans and still a lot of mortgage loans on the books and some subprime — we still got housing prices that are declining in this country, and that makes all of those loans problematic.

“Any respite from the torture chamber is worth hearty celebration. That our time in the chamber is done remains unclear.”

MATT MCCORMICK, PORTFOLIO MANAGER AND BANKING ANALYST ATBAHL and GAYNOR INVESTMENT COUNCEL, INC:

“The table is set to exceed on the upside for a lot of these guys considering expectations are so low, and certainly Wells Fargo blew the cover off the ball.

“In this terrible environment, to exceed on the upside is going to raise the bar pretty high. Wells Fargo is clearly a dominant bank, one of the best operators out there, you’re going to really see the cream rise to the top.”

“Instead of this stress test the government is doing, you’re going to see a real stress test come out now. This is the real stress test — how people handled this environment, which was the worst in modern market history for them.”

“The government is not going to be the type of business partner you want going forward. If these guys now have the ability to exceed on the upside and get out of the TARP restrictions, stand on their own two feet, wasn’t that the goal in the first place?”

NICK KALIVAS, EQUITY MARKET ANALYST, MF GLOBAL RESEARCH, CHICAGO

“It is a surprise. It confirms some expectations that the banks were doing better with their charge-offs. Some lower-rated assets are rallying and the relaxing of the mark-to-market rule is also helping. This public-private plan is helping with the marking up of assets. No one expects them to be this good. It’s possibly a good indicator for the market.”

(Reporting by Richard Leong, Ed Krudy, Paritosh Bansal and Jonathan Spicer)