Senior Research Analyst Guides Investors In The Regional Banking Sector; Chooses His Favorite Stocks In The Space
March 11, 2010 - The Wall Street Transcript has just published Pacific & Southwest 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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Chris Stulpin, Vice President, Senior Research Analyst, joined D.A. Davidson & Co. in July 2007. Previously, Mr. Stulpin worked at Cohen & Company as a Bank Equity Analyst, where he focused mainly on banks located in New England and the mid-Atlantic states. Mr. Stulpin joins Jeff Rulis on D.A. Davidson's bank team, where he is focused on Asian-oriented and Southern California banks. He holds a bachelor's degree in accounting from the University of Pennsylvania.
TWST: How would you characterize the industry over the last six months or so? How have the banks in your coverage universe performed in comparison to banks in other regions?
Mr. Stulpin: In the past six months, we have been bumping along the bottom, and the bumps have tended to separate the winners from the losers. It has become more evident which banks will survive, and which banks will continue to flounder and possibly fail. I think the footprint that I cover has been more stressed than most other regions of the U.S., with the exceptions obviously of Florida and maybe Detroit. California, the sixth largest economy in the world, entered this cycle sooner than anybody else. So I think it's probably going to turn, if it's not already turning, before the majority of the other states or regions.
TWST: It's been a pretty good run-up closing out last year and then starting this year.
Mr. Stulpin: It was. A lot of it could be attributed to situations such as East West (EWBC), for instance, when it took over UCB via FDIC. The stock was up 55% from Friday, when it was announced to Monday. Also a lot of the upside was driven by a little more optimism that the financial system would survive; it was on the cusp of failure. We're out of the abyss, so I think that's also reflected in some of the appreciation in the sector.
Mr. Stulpin: Regarding my coverage footprint, I think we are going to see many failures this year, but I think most of those have been identified by the Street and myself. We are seeing healthier banks positioning themselves to grow when conditions improve, whether it's attracting lending teams, or whether it's acquiring banks via the FDIC or raising capital.
TWST: Are you pretty bullish over the long haul?
Mr. Stulpin: I really am. I know there are a lot of bears out there, and that creates market, but I am bullish. We are not going to be in this recession for the rest of our lives. The economy will recover. And again, fueling a lot of the recovery are small and medium-sized businesses, which are funded by community banks.
TWST: Where are you pointing people now? Do you see some good stories out there?
Mr. Stulpin: I do. I have Cathay (CATY) rated "buy" in addition to Center Financial (CLFC) and Nara (NARA). Asian-American banks - I cover six Asian-American stocks out of my current 12. I think Cathay, and Center and Wilshire (WIBC), in that order, are potential acquirers, and that's a large part of my investment thesis with these names.
TWST: What is that about the Asian banks?
Mr. Stulpin: It is an interesting niche, always evolving and out-of-the-ordinary stories to tell. Just during the past few years, they have showed up on the radar screen of Wall Street. It's a niche that not everybody understands. Value can be added by covering the space.
TWST: It seems Cathay sticks out to you at the moment.
Mr. Stulpin: Yes, it has recently raised a slug of capital, and that is not reflected in the price of the stock. I also believe CATY has a real chance at being a consolidator in the Chinese-American space. I like Center as well - strong management team and consolidator as well, in my opinion.
TWST: What about NARA? They have a new CEO?
Mr. Stulpin: Right. The new CEO, Al Kang, was the CFO when the last CEO, Min Kim, recently departed. I believe Ms. Kim and the BOD reached an impasse. Min was an attribute to the executive team and her absence is a ding, however, Al is quite capable. Plus they conducted a meaningful capital raise, which is key. They have a genuine shot at being a consolidator as well.
TWST: Are there areas of the market or the stocks you cover that you are looking to reduce exposure to?
Mr. Stulpin: My focus continues to be primarily on California or the Southwest. So I'm not going to run away from these markets based on the downturn during the last few years. I think as the cycle turns, there are ample opportunities for investors.
TWST: You mentioned one of your banks is headquartered in Nevada.
Mr. Stulpin: That's Western Alliance. It is made up of several subsidiaries in Nevada, Arizona and Southern California.
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