New Global Safe Haven For Cash: US Banks? Exclusive Interview With 38 Year Banking Valuation Expert
August 15, 2011 - The Wall Street Transcript has just published US Banking Report: An Investor 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.
Recent Wall Street Transcript Special Reports.
Thomas S. Mitchell started in the industry working as a Research Analyst with New York Stock Exchange firm Mabon, Nugent & Co. in 1973, covering consumer and commercial finance companies, credit card companies, and large multi-industry companies encompassing major insurance and financial subsidiaries. He also managed a firm account investing in distressed situations, reorganization and bankruptcies.
In 1983, Mr. Mitchell joined the New York investment management firm of Weiss, Peck & Greer as one of five Portfolio Analysts, with primary coverage responsibility for the financial stock sector. As a General Partner of Weiss from 1984 to 1990, he also initiated programs for the firm to invest in foreign stocks and to use index futures and options for bona fide portfolio hedging. In 1990, Mr. Mitchell branched out to set up an independent money-management shop, Thomas Mitchell Management Co., Inc., and has managed individual and institutional accounts for the past 16 years. He rejoined the sell side at Miller Tabak + Co., LLC, in July 2006 with coverage responsibility for banks, REITs and other financial stocks. A respect for credit analysis and for observation of broad industry trends has guided his investing approach throughout the past 38 years.
TWST: Within the U.S. money center banks, what is the overall situation right now? What are the major investment trends you are watching?
Mr. Mitchell: It's really quite varied. I would say probably the biggest factor that we've observed is simply how each bank got into and then has come out of the financial crisis that got rolling in 2007, and really hit in the fall of 2008. A company like JPMorgan (JPM) has probably emerged stronger on a relative basis compared to its competition. It's a company that never needed to raise a large amount of capital at a very low price. It's a bank that's been able to take advantage of the situation and pick up the Bear Stearns and Washington Mutual franchises at bargain-basement prices. It's a bank that is able to maintain not only solid capital ratios, but also extremely high loss reserve ratios, which gives them a lot of flexibility in deciding what to do next and when to do it.
You take Citigroup (C) and Bank of America (BAC) that basically tiptoed along the edge of the precipice for sometime, and with a lot of seminationalization elements in the process. In the case of Bank of America, taking on Countrywide in 2008 before the crash was terrible timing. And buying Merrill Lynch with a gun put to their head was probably also not very smart. Citigroup was in something of a disarray. I would put Citigroup into a separate category as a company that did not then, and does not yet now, quite know exactly what they want to be when they grow up. So I think the degree of trauma experienced by the different franchises during the financial meltdown still pretty much defines who they are today or how they're conducting themselves today.
TWST: It sounds as if you are saying JPMorgan is pretty well-positioned right now, Bank of America has some issues to still work out and Citigroup is somewhere in the middle. Is that accurate?
Mr. Mitchell: I think that's right. One problem these banks have faced is that when you have a vague, broad mandate, such as "We want to be the world's banker" or "We want to be all things to all people" kind of concept or ethos working through a franchise. It's really hard for the franchise to emerge with a definite sense of focus. So even more than the others, Citigroup comes out looking more like a patchwork of companies that have been put together that don't really have that much to do with each other as these customers are all different from each other. That may not be entirely true, but that's the picture that you get.
TWST: You mentioned there are other banks who have been in this similar situation.
The remainder of this 02 page US Banking Report: An Investor can be immediately viewed by purchasing online.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 202 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
For Information on subscribing to The Wall Street Transcript, please call 800/246-7673