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How Will Financials Fare This Earnings Season?

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    Harris Financial Group Managing Partner Jamie Cox on the outlook for financials.

  • Duration 4:27
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Financials have been the place to be -- -- the best performers top dogs and 2012 beating the market by a pretty wide margin 25% and that pattern has continued into the new year far right of the -- -- the question is was so many earnings reports due out in the next few weeks.

As you know Wells Fargo kicked things off -- should investors take some money off the table.

Or hold on for the ride we bring in Jamie -- Harris financial group managing partner in a Fox Business exclusive welcome Jamie you know.

It's it's not really -- it just simply civil financials do well there are many parts.

To the financial picture but first let's talk about the -- what's -- continue what has been a really strong -- Well I think so I if you look at Wells Fargo today -- they really look their earnings were really.

Pretty -- when it comes to net interest margin of margin as a whole.

But if you look back eighteen months Operation Twist has decimated net net interest margin for by -- And Operation Twist ended in December 31 so what I'm looking for foreign banks like wells Fargo Bank -- America and others.

Is four net interest margin as a lagging indicator to sort of normalize bottom out and actually improve.

Okay good sized Wells Fargo that was that the big disappointment where their net interest marches and and somehow people are surprised by that it doesn't sound like you would've been.

Now I don't I'm not surprised at all about it -- the you can see the flattening of the yield curve I mean the Fed did it on purpose.

We've seen improvement in the yield curve -- steepening and therefore I think that the net interest margin equation.

Is gonna -- back towards Wells Fargo plus the net interest margin really matters to banks that have.

The problem of too much cash too much too many deposits and that's something that Wells Fargo really suffered from if you wanna call that suffering its -- it.

Good problem -- have in the -- of having too much capital so.

Well I'm glad your bringing that up because it cuts the bears would say that -- demand is not picking up with the the alacrity that they would like to see if you look at the sort of low to.

Deposit ratio it's about 72% they've -- to see that we closer to 100%.

So which part.

Which part of the entire financial sector whether it's the big ones.

The regionals the community banks stands to to really get that up -- better performing.

I like the regional banks at this particular moment that the regional banks have not participated at all in the run up in the -- shares in the latter part of 2012.

Last time I saw you was the data suntrust reported last time.

And at that point there those banks that suntrust.

-- really have done absolutely nothing so there's.

More opportunity in those particular areas of the banking industry than any of the larger banks so.

I -- this dividend plays out like them as.

You know as plays on housing you don't wanna -- the housing stocks anymore -- can use the regional banks has plays on terms and housing so that's that's where most of the action should be.

-- first part of one I want I want running.

Hate -- because you ram through them suntrust.

M&T BB&T.

And PNC those are the names that really really like right now what I would -- on the community banks.

Because I'll tell you why.

I look at some of these guys who have been the recipients.

The negativity.

At least when it comes to loans from the bigger guys because of for example my own experience and I would I was turned down by a lot of guys.

A lot of the bigger names to refi and then it was my community bank that that really came -- for -- Lakeland in New Jersey.

Right I think that that the community banks serve the customers and which in the areas of the country which people live.

Very very well but have talking about a bit as investments I don't think they're the best invest the -- banks at this moment.

I like to say one thing though it's interest thing about community banks take Hudson city for example which was recently purchased by -- It but for consolidation I would sort of just steer -- and investment dollars towards the regionals.

Because I just don't think that there's a lot of opportunity in the community banks at this moment that's very tough operating environment for them with net interest margins low.

And and it's on the other mortgage related issues that they and regulatory scrutiny -- that -- been obligated by Dodd-Frank.

But I would say with the M&T pay particular attention to it.

Because the HS the the the Hudson city numbers are not in that stock yet.

It could be another dollar of earnings potential that could be don't.

Factored into that share those shares over the over the course of 23 phase of him particular attention that even -- a hundred dollar stock pay close attention to that.

-- thanks so much.

And then see -- he he lives and -- this stuff obviously we appreciate you coming on.

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