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Five analysts and top management from twenty-five sector firms examine the eastern regional banks sector in this special 127-page Eastern Regional Banks issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info481.htm.

TWST: What is your outlook for 2002? What are your favorite stocks today?

Ms. Bush: My outlook is pretty simple, and I think this kind of tacks on to what Chris may have said here. There were some stocks that performed pretty poorly in 2001 that I think are going to do much better in 2002, one of them being State Street (NYSE:STT). I want clients to be in companies that are leveraged because I do believe that the economy is going to get better. I do believe that the margins are going to perform better. The S&P has had two lousy years here. I think it’s time for a good one. I want to be with those companies that are leveraged to the markets, and State Street is pretty much a pure play to the recovery in global markets, whether it’s through asset valuations and SSgA or through the fees that are generated through the various custodial and pricing activities that they do. It is a growth story, and I think they’re set to resume growth. I think the new CEO or the relatively new CEO, David Spina, has been terrific in that slot. I think he has brought a cost discipline, or at least a recognition of cost to the company that had not existed there before. This is a quality company with a franchise that can’t be duplicated at this point. They’re so large in some of their businesses that they’re beyond replication; it’s a very high beta stock, i.e., highly leveraged to the markets, that has performed poorly in the last 52 weeks and is likely going to reverse that performance in the next 52.

TWST: Nancy, as your final word, what would your advice be to investors as they look at the Eastern banks for 2002?

Ms. Bush: I don’t expect, as a whole (whether we’re talking about Eastern banks, Midwestern banks or whatever), the kind of relative outperformance that we had in 2001, which as Gerard said was pretty massive relative to the market by dint of not being down nearly as much. I do think we will get a better absolute performance from the banks and from the Eastern banks. But I think everybody’s got to come back to reality here about what is a normal return in a stock and, certainly, what is a normal return in a bank stock. And my advice is to not forget about dividends. The level of dividends is one thing, but the growth of dividends is something else. I think the dividend discount model is something that is alive, well, and working at the edges here, and some of these companies have grown their dividends pretty well over the years. I do expect a better absolute performance from the stocks, but I don’t expect anything that’s going to put them up there as gainers with the tech stocks of the days of old. This is the year, I think, whether you’re looking at a bank stock or anything else, to be an investor. And I hope that if we’ve learned one thing over the last few years as a society, it’s that investment is not holding for three weeks: it’s not day-trading. It is that you buy these companies where you believe the managements and the strategies are sound, you look for good dividend growth, you look for strong capital structures, and you stay the course.

This special issue includes:

1) Eastern Regional Banks - In an in-depth (13,500 words) Analyst Roundtable, Nancy A. Bush, Managing Director at Ryan Beck & Co., Gerard S. Cassidy, Managing Director of Equity Research at RBC Capital Markets and Christopher Marinac, Managing Director at SunTrust Robinson Humphrey, examine the outlook for the sector including stock performance in 2001, regulatory outlook and share specific stock recommendations.

2) Super-Regional Banks - In an in-depth (4,100 words) Analyst Interview, Jennifer A. Thompson, Analyst at Putnam Lovell Securities, Inc., examines the outlook for the sector including and shares specific stock recommendations.

3) Eastern Banks - In an in-depth (3,100 words) Analyst Interview, Jacqueline Reeves, Managing Director at Putnam Lovell Securities, Inc., examines the outlook for the sector including and shares specific stock recommendations.

4) The TWST confidential Off-The-Record survey of management performance of nineteen sector firms asked market insiders about the ability of management teams to create shareholder value.

5) CEO interviews (average 2,500 words). Top management of twenty-five sector firms examine the outlook for their firm and the sector.