Northeast Midcap Banks on the Prowl to Steal Market Share from Large-Caps: A Wall Street Transcript Interview with David W. Darst, CFA, a Managing Director with Guggenheim Securities, LLC

Wall Street Transcript

67 WALL STREET, New York - January 6, 2014 - The Wall Street Transcript has just published its Northeast and Mid-Atlantic Banks Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Interest Rates and Loan-Growth Strategies - Regulatory Outlook Gains Clarity - Regulatory Obstacles and Fee Income Replacement - Rise of Commercial and Industrial Lending - Pockets of Growth in Northeastern Banking - Annualized Loan Growth Acceleration - Prolonged Interest Rate Environment Challenges - Midcap Market Share Gains

Companies include: Investors Bancorp Inc. (ISBC), Signature Bank (SBNY), Capital One Financial Corp. (COF), Roma Financial Corp. (ROMA), Hudson City Bancorp, Inc. (HCBK), M&T Bank Corp. (MTB), People's United Financial Inc. (PBCT), Lakeland Bancorp Inc. (LBAI) and many others.

In the following excerpt from the Northeast and Mid-Atlantic Banks Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Tell us briefly about your coverage universe.

Mr. Darst: I cover banks in the Mid-Atlantic and Northeast, and we also write about the midcap bank industry, focusing on banks with assets between $10 billion and $65 billion. This peer group has generally been active with M&A over the past couple of years. They've been focusing on organic strategies as well as efficiency initiatives, and they're also gaining - or well-positioned to gain - market share from the large-cap banks in their markets.

TWST: Is that market share trend happening across the board?

Mr. Darst: It's not across the board. In some ways it's market-driven. You're seeing more of it in New England and the Northeast than in the Mid-Atlantic. In New York, there is a lot of opportunity along those lines, because it's such a big market. But overall, that market share move is a big focus for us. It's part of our general investment thesis this year, along a focus on banks in large markets that have seen a quicker pace of recovery in real estate activity and business activity. That is driving more loan demand.

In that same vein, we are also focused on banks that benefit from a steeper yield curve. They are going to get the most favorable earnings estimate revisions, bettering the names that we would call the most asset-sensitive. Finally, we're looking at banks we expect to benefit the most from rising short rates. We want banks that can benefit from higher rates today rather than those who would need the Fed to raise rates, which probably won't happen until 2015 or even 2016.

TWST: How do you go about identifying banks that could benefit from a steeper yield curve?

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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