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Wren: Underweight Financials

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  • Description

    Wells Fargo senior equity strategist Scott Wren explains why the run in financials won't last.

  • Duration 3:53
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Show but that isn't can be -- -- banks raising fees and raking in profits over the past year fees on everything from.

Checking accounts ATM use soaring to new record -- that's according to research firm Moab.

Overdraft fee revenue for banks up by 700 million dollars alone -- a record 31 point five billion dollars.

Between 2011 and 2000 all the technicalities also rose to a new record with the average -- for no interest checking account up -- 25%.

Overall.

AT -- is also up rising seven per -- but despite all of this.

-- windfall for the banks and these big fees my next guest says underweight the financials Scott ran must write a senior equity strategist.

Joins us now Scott you don't like the financials but how can you ignored the millions of dollars of the banking billion dollars -- making in these three days.

While and and that's true -- and you know to be honest with you we would like to been overweight financials in hindsight because they've been really the best performer year to date basis so we've been underweight the 10200 basis points something like that modestly -- And it really hasn't worked for -- but I think banks they're trying to figure out.

How they're going to make money because with the new regulations are not going to be able to participate a lot of activities that they had.

Over the past you know in the past decade that's for sure self for me -- -- like to look at loan growth long growth isn't very good a lot of these earnings have grown because -- loan loss for loan loss reserves are being released.

Things like that -- -- interest margin isn't very good so I think.

And banks have had a big run here and let's you know let's let's be certain that there's been a lot of six Dollar Financial stocks have gone to eight dollars and you know that's big percentage -- so I think this run that -- -- -- financials I don't think it's going to last and I think.

Underweight is is the way you need to be yeah.

You don't does say underweight I mean I have to challenge on this got to get -- campsite a look at Bank of America a year to -- up 67% up on us both the -- our stock you're talking about.

Take a look at JPMorgan of 25%.

A year today trilogy can't comment on specific name sort of the same time it's hard for investors -- are desperate for returns.

-- ignore the performance of these banks and what a lot of customers' -- say they'll switch banks they won't at the end of the day that's the psychology of the bank -- -- and.

It is pretty sticky it really is even with these were these fees -- -- -- think people are going to shop around but you know once you what you get locked in with the bank and -- some automatic payments your house payment other things like that.

It is it is tough to switch but I think you're going to see some increase -- a competition.

On these -- I think these these run ups that you talked about I mean we've with.

Financials have really -- performed well the market overall -- and financial said beat the overall market so I think you have to think forward what's gonna happen from here.

And I don't think you're going to see net interest income increased much I think -- loan growth is going to be.

Not all that great and I and I think you're gonna continue to see -- -- loss reserves but.

You know making your turning off season try to buy stocks based on increased fees I think that's why.

That was one thing we get highlight -- it is that I how is let's talk able quietly -- like you wanna ask you real quickly I know that you're telling your clients to look elsewhere you're looking for pullbacks and equities you're saying we may get back towards the end of the year -- -- fiscal -- coming a couple of sectors elect Scott.

Well I think we want to pay attention to the consumer discretionary sector.

-- we want to pay attention to technology.

Materials have been really beaten up and we wanna we wanna pay attention -- materials because I think that -- recoveries going to continue here it's gonna continue globally it's going to be very.

Modest growth with low inflation.

You wanna be long these cyclical stocks I don't think financials is going to be one of the -- so.

OK all right well maybe a couple months some have to have you back and look at the performance -- -- and they give parents.

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