One of the biggest bulls among Wall Street banking analysts is pulling in his horns.
Michael E. Mayo's demotion of BankBoston Corp. shares to "buy" from "strong buy" last week is the Credit Suisse First Boston analyst's 26th downgrade in 10 months, with many coming in recent months.
"If you had to put me in a bullish or bearish camp, given only two camps, I'd prefer the latter," Mr. Mayo said.
Mr. Mayo had been one of the industry's biggest cheerleaders in recent years, saying banking stocks had plenty of room for gains. But in recent months "it's been getting more difficult to find compelling names to recommend," he says.
Mr. Mayo now rates none of the major banks he covers as "strong buys." A year ago he had 15 banking companies with that rating.
The value just isn't there over the medium term, Mr. Mayo said.
"We certainly have room for 'sell' ratings," Mr. Mayo said. "That's a possibility."
Several of the downgrades involved banks that were taken over, such as First Chicago NBD Corp. and Crestar Financial Corp. He has also lowered his rating on acquirers such as SunTrust and Fleet Financial Group.
But more and more downgrades have involved banking companies that have had difficulty making earnings targets. Union Planters Corp. falls into that category, Mr. Mayo said. Also, the margins went down at Wells Fargo and National City Corp. of Cleveland in the fourth quarter, Mr. Mayo said.
For the banking industry as a whole, "the efficiency ratio in the fourth quarter was worse than it has been in a couple of years," Mr. Mayo said.
"We're seeing some fraying on the edges in terms of the quality of the earnings. …