Magazine article American Banker

Bear Stearns Analyst Bullish on Banking Industry

Magazine article American Banker

Bear Stearns Analyst Bullish on Banking Industry

Article excerpt

Ann Robinson of Bear Stearns & Co. cut her teeth as a bank bond analyst in the difficult boom and bust years of the late 1980s, and quickly developed a reputation for keen insight.

Among bank stock analysts "she's well into the 90th percentile of accuracy," said Tom Quigley, a retired Wall Street trader who worked with Ms. Robinson for several years at Donaldson, Lufkin & Jenrette.

Mr. Quigley and Ms. Robinson navigated the treacherous bank environment of the early 1990s, when spreads on bank bonds widened out 100 basis points or more in a single day. Mr. Quigley marveled at Ms. Robinson's ability to understand and forecast instability in the market.

Fortunately for banks, the waters ahead appear much calmer to Ms. Robinson - and even present a few investment opportunities.

"Things are fairly sanguine right now," she said last week. Several macroeconomic indicators suggest that the economy is indeed headed for a soft landing, she said, which stalls changes in bank bond spreads.

The 5.5% savings rate, the recovery of the slumping dollar, and the momentum to reduce the federal deficit suggest that the next few months will be fairly quiet in bank bonds, presenting opportunities for banks with upward credit rating prospects.

While the market doesn't present any screaming buys, Bank of Boston, West Coast thrifts, and PNC make her current buy list.

Despite a recent ratings downgrade from Moody's, PNC is a buy at 80 basis points over treasuries, since the worst is probably over for the Pittsburgh-based holding company and the downgrade is already factored into the price, she said.

Additionally, Citicorp, Bank of New York, and Midlantic have positive ratings potential, she said.

First of America in Kalamazoo, Mich., is a "Midwest gem" that stands out for being undervalued, said Ms. Robinson.

Nobody loves it, but at 85 basis points above Treasuries, it's trading about 10 basis points cheaper than its financial ratios would justify, she said. …

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