Wall Street Transcript Interview with Eric Wasserstrom, Managing Director at SunTrust Robinson Humphrey: Compressed Margins, Re-emerging Legislative Risks for Big Banks

Wall Street Transcript

67 WALL STREET, New York - April 30, 2013 - The Wall Street Transcript has just published its Money Center 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 and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Investing in Regional Banks - Increase In Investor Risk Tolerance - Regulatory Obstacles and Fee Income Replacement - Fiscal Cliff Effects on Banking - Interest Rates and Loan-Growth Strategies - Regulatory Outlook Gains Clarity

Companies include: Bank of America Corporation (BAC), JPMorgan Chase & Co. (JPM), Citigroup, Inc. (C), Morgan Stanley (MS), Goldman Sachs Group Inc. (GS), PNC Financial Services Group I (PNC), US Bancorp (USB), Wells Fargo & Company (WFC), Regions Financial Corp. (RF) and many more.

In the following excerpt from the Money Center Banks Report, an expert analyst discusses the outlook for the sector for investors:

TWST: What would you say are the key themes or trends that you are following as it relates to the big banks?

Mr. Wasserstrom: I think there are several, a few fundamental and, more recently, the issue of re-emerging legislative risks. On the fundamental side, this isn't really a new story, but we continue to be in a very low-rate environment, which is compressing margins, somewhat offset by the fact that there does seem to be some areas of loan growth, primarily in what are niche, specialty commercial and specialty consumer areas.

Fee income streams continue to be reasonably robust; that's coming partly from sustained mortgage volume, although we expected this to dissipate later into the year. Capital markets activity started off the year reasonably strongly, coming off of a strong fourth quarter, but looks more recently like it has also diminished somewhat, so in the face of some of those revenue pressures, unsurprisingly what we continue to see is a lot of focus on cost control.

There have been some very significant announcements from some of the companies - Bank of America (BAC), for example, in terms of layoffs, and Citigroup (C) - but you are also seeing it in other forms that may be less prone to get headlines. Certainly in terms of branches, we are seeing institutions limit their branch presence in certain markets, shutting down branches, which, of course, would have been an unheard of trend a few years ago.

And then I think the final fundamental theme is really one about capital return, right on the heels of the CCAR process for this year. I think the interesting thing about CCAR was, while the actual announcements of capital return from the banks were generally in line with what people had been expecting or with what the managements themselves had implied, you did have a couple of upside surprises. Bank of America, for example...

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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