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TWST: Kate, what drives investor sentiment toward the bank stocks and what drives the stocks?

Ms. Blecher: Investor sentiment is driven by three main factors, the primary factor being interest rates. There is a belief among investors that when interest rates are falling, that’s the time to be in the interest-sensitive sectors, especially the banks. The second factor is the expected growth rate of banks’ earnings. If we’re in a stage where the economy is doing well and we don’t have credit quality concerns, people look at the sector as a potential of solid, consistent growth growth. Lastly, a pickup in mergers and acquisitions draws investor interest to the group. What moves the stocks is investor sentiment, sector rotation, and valuations. This is certainly not unique among the banks. Banks benefit when other sectors have fallen out. We saw that specifically last year when the technology stocks went out of favor and investors went back to the old economy stocks. Then sectors such as the banks were major outperformers. So the stocks go up on rotation that’s favorable to the group, and when they have historically low valuations and interest rates are falling, investors are particularly drawn to the group.

TWST: Where else are you guiding investors today?

Ms. Blecher: Today, we also like Mellon (NYSE:MEL), which is similar to Bank of New York in that it’s a high fee producer. They are most widely known for their asset management business. For example, they own the widely distributed, very popular Dreyfus family of funds. Revenue from their large asset management business is very stable, and it provides a greater percentage of growth to the shareholders and to earnings. They have very good credit quality. Their reserve levels are among the highest in the peer group and they have a relatively small loan portfolio. Again, this is due to the move toward a fee-based income. So we feel very strongly about Mellon.