Award Winning Analyst Recommends Banks That Lose Money
November 18, 2009 - The Wall Street Transcript has just published Northeast & Mid-Atlantic Regional Banks Report offering a timely review of the Banking sector. This Special Report contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. Please find an excerpt below.
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Paul Miller, Managing Director and head of financial institutions research at FBR Capital Markets, is well known in the investment community for providing in-depth, fundamental analysis and investment recommendations on thrifts and mortgage finance companies. Mr. Miller covers large-cap banks, mortgage banking companies and small-cap thrifts, including Bank of America, Wells Fargo & Co., PNC Financial Services and BB&T Corp.
Mr. Miller was recognized by the Financial Times/StarMine in 2008 and 2009 as the leading earnings estimator in thrifts and mortgage finance. He was also named The Wall Street Journal's "Best on the Street" in 2006 and 2007 for coverage of thrifts. In 2008 and 2009, Mr. Miller received the Forbes.com Blue Chip Analyst Award as the leading analyst covering banks and thrifts; he received the same award for coverage of finance companies in 2009. In 2008, Bloomberg Markets ranked Mr. Miller number one for bearish best calls from among more than 3,000 analysts worldwide. Mr. Miller is a former Bank Examiner for the Federal Reserve Bank of Philadelphia, where he worked for five years. As a Bank Examiner, Mr. Miller conducted financial analysis for more than 30 community banking institutions in the Philadelphia and Harrisburg market areas. Mr. Miller earned his B.S. in economics, his B.A. in international relations and his M.S. in economics from the University of Delaware. He received the charted financial analyst designation in 1997.
TWST: In terms of the large banks you mentioned, do you think they're likely to emerge even stronger and more dominant from all of this? Or will the de-leveraging create a more even playing field?
Mr. Miller: I think the larger banks will be hindered by regulation. The issue is that the government has pretty much said that we are not going to fail any more large institutions anymore. However there is going to be a reaction to that type of statement. Okay, we are not going to fail Bank of America (BAC), but we are going to regulate Bank of America so they don't get into this type of trouble ever again. And so they are going to have to hold higher capital levels than your smaller institutions. They are going to come under more scrutiny than the smaller institutions. I think that's where the advantage is for the smaller institutions, and I think these big companies will start to split up knowing there is no advantage in being big like there was in the past.
TWST: Will investors see any opportunities ahead?
Mr. Miller: I think as an investor you've got to be careful. You've got to pick your spots and invest in certain regions. You've got to invest in certain balance sheets that are beaten up. You've got to be careful to stay away from the rich stocks like the Wells Fargos, USBs (USB), BB&Ts (BBT) and focus on those companies that are trading at book or below book, like a Fifth Third (FITB), like a KeyCorp (KEY), which is trading a little bit above book. That's where you want to focus on now, on companies that don't make money. It seems kind of odd to be recommending stocks that don't make money, but they are trading at book or right around book whereas some of these other banks, like Wells Fargo (WFC), are trading close to three times book. We think there is very little upside in owning Wells Fargo at these levels.
PAUL MILLER
Managing Director,
Head of Financial Institutions Research
FBR Capital Markets
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The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
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