Chris Kotowski is a Managing Director and a Senior Analyst at Oppenheimer & Co. Inc. Mr. Kotowski covers the large-cap banks and brokers, private equity companies and the business development corporations. Mr. Kotowski originally joined Oppenheimer in 1985 as a research associate in the banks franchise and was promoted to Senior Bank Analyst two years later. Over the next nine years, he led a team of four in covering over 45 stocks, supporting both large-cap institutional efforts and the firm’s small-cap franchise. During this time, he was often represented in Institutional Investor’s annual rankings and was consistently ranked among the firm’s top analysts. In this exclusive interview with the Wall Street Transcript, Mr. Kotowski reviews the landscape of financial institution stocks.
“I’ve been covering these stocks on and off for 30 years, and there is always a fairly large population of bank haters and bank skeptics. That is why these stocks tend to trade, like I said, between 60% and 80% relative to p/e. What I would tell you is that I have never seen the banks actually be as well-managed and as de-risked as they are now and yet, at the same time, have as many skeptics as there are. I think it is a healthy combination.”
The Oppenheimer & Company analyst picks out one large bank stock as his current favorite.
“Citigroup (NYSE:C) remains one of the few really excellent values. It is still trading fairly cheap in absolute terms. The stock is $73 with tangible book at about $67, so it is trading at a very small premium to tangible book at a time when most bank stocks are trading, say, between 1.8 and two times tangible book. It is still very cheap. Citibank, for all that, was the poster child of everything that went wrong in the first decade of the 2000s.
It is a consistently profitable company. It has been earning $15 billion or so a year for the last three years. Just to put that into perspective, that is more than Amazon (NASDAQ:AMZN), Facebook (NASDAQ:FB) and Netflix (NASDAQ:NFLX) combined. So it is a very profitable company. It doesn’t have the growth of those other companies, but it generates a lot of earnings, and it will return $15 billion to $20 billion of capital a year for the next couple of years because its capital generation is actually in excess of the reported earnings. It will be a good stock for the next two years.”
For more top financial stocks from this sage investment analyst, read the entire interview in the Wall Street Transcript.